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Vikas Lifecare rights issue review (Avoid)

Vikas Lifecare Limited Logo

•    The company has changed its name very frequently.
•    It has suffered a severe setback in pandemic periods.
•    Promoters' holding kept reducing over the last three quarters as per BSE records.
•    There is no harm in giving this issue a miss.

PREFACE:
Vikas Lifecare Ltd. was originally promoted as Akshatha Services Pvt. Ltd. which changed its name to Moonlite Technochem Pvt. Ltd. and then to Vikas Multicorp Ltd. and finally rechristened itself to its current name. However, it appears that considering the current fancy for the pharma sector, it has tried to lure the attention of the general masses with the 'Lifecare' word in its name.

Further as per exchanges data for the last three quarters' promoter's holding has been reduced from 53.5% on Sept 20 to 20.07% on March 21.

ABOUT COMPANY:
Vikas Lifecare Ltd. (VLL) (erstwhile known as Vikas Multicorp Ltd) was established primarily as a plastic waste recycling processor cum polymer trader and off late also entered into trading of raw and finished cashew nuts to tap the FMCG segment. Current activities of the company include trading and manufacturing of polymer compounds, manufacturing of recycled material,

ISSUE DETAILS:
To part finance funding of its various plans, VLL is coming out with a rights issue of 265398198 equity share of Re. 1 each at a fixed price of Rs. 1.85 per share to mobilize Rs. 49.10 cr. The company is offering rights shares in the ratio of 2 shares for every 5 shares held as on record date of May 21, 2021. The issue opens for subscription on May 27, 2021, and will close on June 10, 2021. Post allotment, shares will be listed on BSE and NSE. The company will be spending approx. Rs. 0.79 cr. for this entire rights issue proceeds.  From the residual proceeds, Rs. 9.24 cr. will be adjusted against unsecured loans against the entitlement of the promoters. Rs. 14.70 cr. to be used for capital expenditure for food preservation and storage unit, Rs. 15.00 cr. for working capital, Rs. 3.68 cr. for repayment of company's loans and Rs. 5.69 cr. as general corpus fund. No bank or financial institution or any other independent agencies have appraised these plans of the company.

The issue is solely lead managed by Mark Corporate Advisors Pvt. Ltd. and Alankit Assignment Ltd. is the registrar to the issue.

Post issue, VLL's current paid-up equity capital of Rs. 6.64 cr. will stand enhanced to Rs. 9.29 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, VLL posted a turnover/net profit of Rs. 200.89 cr. / Rs. 1.48 cr. (FY18), Rs. 219.18 cr. / Rs. 2.08 cr. (FY19) and Rs. 158.19 cr. / Rs. 1.40 cr. (FY20. For the first nine and half month period ended on January 15, 2021, it has earned a net profit of Rs. 0.07 cr. on a turnover of Rs. 53.27 cr. Thus it has suffered a severe setback during the pandemic period as claimed by the management.

VLL's total borrowings as of January 15, 2021, stood at Rs. 43.16 cr. and the company has litigation on taxation matter amounting to Rs. 2.75 cr. that raises concern.

SCRIP MOVEMENT ON EXCHANGE:
The scrip (BSE Code 542655) turned ex-right on May 20, 2021. As per BSE data, it closed at Rs. 3.41 as cum-right on May 19, 2021, and ex-right at Rs. 3.09 on May 20, 2021. On May 21, 2021, it quoted at Rs. 3.24 (at the upper circuit). This counter is totally operators driven as per market sources and hence it will keep surging to lure investors to subscribe to the rights issue. The scrip has marked 52 weeks high/low of Rs. 18.64/ Rs. 1.88.  At the rights issue offer price, VLL is looking for a market cap of Rs. 171.84/1.85* cr. against its market cap of Rs. 300.96 cr. based on its last quote at Rs. 3.24.


Conclusion / Investment Strategy

The company’s changed name Vikas Lifecare Ltd. has nothing to do with the lifecare segment. Promoters’ holding kept declining over the last three quarters. It's outstanding of Rs. 43 cr. debt and litigation on taxation matters amounting to Rs. 2.75 cr. raises major concerns. Based on its latest earnings, the issue is priced above 185 P/E and thus its exorbitantly priced offer. The counter is purely operator driven as per market sources and hence it's a high risk/low return bet. There is no harm in giving it a miss.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on May 22, 2021

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at its own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

The Vikas Lifecare Rights Issue Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered Rights Issue Analysts tells you if Vikas Lifecare Rights Issue worth investing. The Vikas Lifecare Rights Issue Note sets the Rights Issue expectations in systematic way which tells you if Vikas Lifecare Rights Issue good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in Vikas Lifecare Rights Issue by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.