• VCBL is engaged in the coffee business, a highly competitive segment with many big players.
• Its financial performance on a consolidated basis for the last two fiscals remained erratic.
• Based on its market price, the issue appears lucrative.
• Well-informed cash surplus investors may consider parking funds for the long term.
ABOUT COMPANY:
Vintage Coffee & Beverages Ltd. (VCBL) - erstwhile known as Spaceage Products Ltd.) - is engaged in the coffee business through its subsidiary, Vintage Coffee Private Limited ("VCPL") and Delecto Foods Private Limited ("DFPL"). It operates a highly optimized and vertically integrated coffee business which ranges from procuring, processing and roasting coffee beans to retailing coffee products across various formats.
Its presence across the entire coffee value chain enables the company to exercise effective control over various segments within the coffee business, ensuring quality and consistency in the entire process from procurement, processing and roasting to consumption across multiple points targeting multiple consumer segments.
The new management took over the company in FY22. Its present customer base comprises a large number of overseas and Indian companies/concerns, and mulls adding more new customers going forward. It is operating in a highly competitive segment with many big players/MNCs. VCBL's product basket included Spray Dried instant coffee and agglomerated instant coffee. As of the date of this offer document, it had 8 employees on its payroll.
ISSUE DETAILS:
The company is coming out with a Rights Issue (RI) of 34901136 equity shares of Rs. 10 each at a fixed price of Rs. 12 per share to mobilize Rs.41.88 cr. The issue opens for subscription on July 03, 2023, and will close on July 10, 2023. The full amount is to be paid on the application for the number of shares applied. It is offering RI in the ratio of 1 for 2 to eligible stakeholders as of the record date of June 19, 2023. Post allotment, shares will be listed on BSE. The company is spending Rs. 0.25 cr. for this RI process and from the net proceeds it will utilize Rs. 21.00 cr. for investment in subsidiary Vintage Coffee Pvt. Ltd., Rs. 6.63 cr. for investment in subsidiary Delecto Foods Pvt. Ltd., Rs. 4.00 for acquisition of similar business, and Rs. 10.00 cr. for general corporate purposes.
The issue is self-managed by the company and Purva Sharegistry (India) Pvt. Ltd. is the registrar of the issue. Navigant Corporate Advisors Ltd. is the advisor to the issue.
Post-RI, VCBL's current paid-up equity capital of Rs. 69.80 cr. will stand enhanced to Rs. 104.70 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 125.64 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, VCBL has (on a standalone basis) posted a turnover/net profit of Rs. 0.21 cr. / Rs. 0.10 cr. (FY21), Rs. 5.32 cr. / Rs. 0.18 cr. (FY22), and Rs. 37.12 cr. / Rs. 1.15 cr. (FY23).
On a consolidated basis, for the last two fiscals, VCBL has posted a turnover/net profit - (loss) of Rs. 37.26 cr. / Rs. - (12.27) cr. (FY22), and Rs.63.29 cr. / Rs. 3.86 cr.
DIVIDEND POLICY:
The company has not declared any dividends for the last five fiscals. It will adopt a prudent dividend policy based on its financial performance and future prospects.
SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 538920 (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 24.83 on June 16, 2023, and opened on an ex-right basis at Rs. 19.54 on June 19, 2023. Since then, it has marked a high/low of Rs. 22.50 / Rs. 18.95. The scrip last closed at Rs. 19.16 as of June 30, 2023. For the last 52 weeks, it has posted a high/low of Rs. 86.82 / Rs. 16.77.
The promoters' holding has declined from 72.22% as of September 30, 2022, to 69.90% as of March 31, 2023. The counter has witnessed volatile trades with vested interest operations. It is well maintained above the RI price.
Based on its price movement, RI appears lucrative, but post-RI higher equity capital of Rs. 104 cr. plus raise concern over its servicing, as the company has posted erratic financial trends for the last two fiscals on a consolidated basis. On a standalone basis, financial performance is on a minuscule level.
Review By Dilip Davda on July 1, 2023
Dilip Davda is a veteran financial journalist associated with the Indian stock market since 1978. He has been contributing to print and electronic media on capital markets, insurance, and finance since 1985.
He is widely recognized for reviewing public issues and non-convertible debentures (NCDs) in the primary market. Drawing on over three decades of market experience and close interaction with merchant bankers, his reviews focus on detailed fundamental and financial analysis of companies, with a special emphasis on SME public issues.
Dilip Davda
SEBI Registered Research Analyst – Mumbai
Registration No.: INH000003127 (Perpetual)
Email: dilip_davda@rediffmail.com
Disclaimer: The information provided herein is solely for educational and informational purposes and does not constitute an offer, solicitation, or recommendation to buy or sell any securities. Readers are advised to consult a qualified financial advisor before making any investment decisions. Investments in the securities market are subject to market risks. The author does not intend to invest in the securities discussed.
