Visagar Fin RI review (Avoid)

Visagar Financial Services Limited Logo

•    VFSL is in the business of financial services and investment. 
•    Though the issue is at par value, its financial reports are not encouraging.
•    It has posted losses for the current fiscal so far. 
•    It may face servicing issues for over a five-fold jump in its paid-up capital.
•    There is no harm in ignoring this at par RI that has very low promoter's holding. 

Visagar Financial Services Ltd. (VFSL) - (erstwhile known as Inca Finlease Ltd.) is a Non-Banking Financial Company (NBFC) registered with RBI to carry on the business of NBFC without accepting public deposits under Section 45 IA of the Reserve Bank of India Act, 1934.

The company is a non-deposit-taking Non-Banking Financial Company (NBFC-Non-Systematically Important Non-Deposit Taking Company categorized as Investment and Credit Company i.e. ICC) registered with the RBI. VFSL is primarily engaged in the business of investing in securities of listed and unlisted companies. Its investment strategy depends on the opportunities, and market conditions; both long-term and short-term, and it invests in a variety of sectors. The company generates maximum revenue from the sale of shares. It provides both secured and unsecured loans based on the risk profiles of the clients. The company needs financial resources to fuel the growing demand and to seize the opportunities presented by the market from time to time. As of the filing date of this offer document, it has 7 employees on its payroll.

The company is offering a rights issue (RI) of 497387700 equity shares of Re. 1 each at a par value to mobilize Rs. 49.74 cr. VFSL is issuing 51 shares against 10 shares held by the eligible shareholders as of the record date of December 30, 2022. The issue has already opened for subscription on January 12, 2023, and will close on February 02, 2023. The full money is to be paid along with the application for the number of shares applied. Post allotment, shares will be listed on BSE. The company is spending Rs. 0.50 cr. for this RI, and from the net proceeds, it will utilize Rs. 39.24 cr. for working capital, and Rs. 10.00 cr. for general corporate purposes. 

This RI is self-managed by the company and Adroit Corporate Services Pvt. Ltd. is the registrar of the issue. 

Post-RI, VFSL's current paid-up equity capital of Rs. 9.75 cr. (97527000 shares) will stand enhanced to Rs. 59.49 cr. (594914700 shares). Based on the RI pricing, the company is looking for a market cap of Rs. 59.49 cr. 

On the financial performance front, for the last three fiscals, VFSL has posted a total income/net profit (loss) of Rs.1.52 cr. / Rs. - (0.28) cr. (FY20), Rs. 66.58 cr. / Rs. - (0.35) cr. (FY21), and Rs. 16.82 cr. / Rs. 0.24 cr. (FY22). 

As per BSE filings, for H1 of FY23, it posted a loss of Rs. - (3.06) cr. on a total income of Rs. 23.31 cr., and for 3Qs of FY23, it reported a loss of Rs. - (2.70) cr. on a total income of Rs. 31.54 cr.

Thus the company's financial data has inconsistency in its top and bottom lines. 

The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

The scrip last closed on cum-right basis at Rs. 2.46 on December 29, 2022, and opened at Rs. 1.30 on an ex-right basis on December 30, 2022. Since then, it marked a high/low of Rs. 1.49 /Rs. 1.12. The scrip last closed at Rs. 1.16 on January 13, 2023. The scrip has posted the last 52 weeks' high/low of Rs. 3.51 / Rs. 0.61. The counter is well managed with a thin volume. The promoter's shareholding has been constant at 5.34% for the last three quarters ended in September 2022 and is a major concern. The counter is well managed above par value to lure investors.

Conclusion / Investment Strategy

The company has been in the financial services/investment business and has posted inconsistency in its performance for the reported periods. The promoter’s holding is just 5.34% which raises major concern. Though the RI is at a par value, the sudden boost in paid-up equity capital may face servicing issues. The is no harm in ignoring this RI as its high risk/low-return bet.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Jan 13, 2023

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

More Visagar Financial Services Limited RI Views / Analysis / Recommendations ...

The Visagar Financial Services Rights Issue 2022 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 Visagar Financial Services Rights Issue 2022 worth investing. The Visagar Financial Services Rights Issue 2022 Note sets the Rights Issue expectations in systematic way which tells you if Visagar Financial Services Rights Issue 2022 good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in Visagar Financial Services Rights Issue 2022 by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.


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