Maharashtra Corp RI review (Avoid)

•    MCL kept changing its name and business models in the past.
  •    Currently it is engaged in its trading activities and mulling realty business.
  •    The company has posted minuscule financial performance for FY21 and FY22.
  •    Low promoter’s holding raises concern.
  •    There is no harm in skipping this at-par issue.

ABOUT COMPANY:
Maharashtra Corporation Ltd. (MCL) was originally incorporated as Maharashtra Industrial Leasing and Investments Ltd. Subsequently it changed its name to Maharashtra Overseas Ltd. and is currently known as Maharashtra Corporation Ltd. It is engaged in the business of investing, trading, and distribution of textiles products, such as gunnies, handicrafts, hessian, tea, shellac, tobacco, hides, skins, kapocks, cotton, cotton goods, myrobalan, nux, indigo, oils, oilcake, fertilizers, manure, rubber, dates, rice, seeds, chemicals, colour, paints, pigments, timber, iron, steel, carpets and all kinds of goods, products, commodities, articles and things manufactured from or contained in any manner and from any of the foregoing commodities and all goods, products, commodities, articles and things.

On December 13, 2021, it proposed to enter into the business of purchasing any movable or immovable property or any right or interest therein either singly or jointly or in Partnership with any person(s) or Body corporate or partnership Firm or to enter into Joint Venture or Understandings or on a contractual basis or to act as agents to develop and construct industrial, commercial, residential, or farmlands, plots, buildings, houses, apartments, flats or areas within or outside the limits of Municipal Corporation or other local bodies, anywhere within the Domain of India or outside India, to divide the same into suitable plots, and to rent or sell the plots for building/constructing shopping malls, residential houses, bungalows, villas, business premises, industrial parks and colonies and rent or sell the same and realize the cost in a lump sum or easy instalments or by hire purchase system and otherwise. The same proposal has been approved by the shareholders through a postal ballot at an Extra Ordinary General Meeting of the Equity Shareholders of Maharashtra Corporation Limited held on January 29, 2022. Currently, the company and its promoters are facing many litigations. The offer documents are silent on its employee’s strengths and dividend policy.

Though it is headquartered in Mumbai, it is planning a realty project in Ahmedabad, which is surprising.

ISSUE DETAILS:
To part finance its plans for purchase, development and construction-related expenses (Rs. 47.40 cr.) and general corporate purposes (Rs.1.72 cr.), MCL is coming out with a rights issue (RI) of 496222210 equity shares of Re. 1 each at par to mobilize Rs. 49.62 cr. The company is issuing 11 RI shares for every 3 shares held by the shareholders as of the record date of July 08, 2022. The issue opens for subscription on July 19, 2022, and will close on August 02, 2022. To lure investors to this RI, surprisingly, the company has kept Rs. 0.25 per share as an application price and the balance of Rs. 0.75 is to be paid on one or more subsequent calls by the company from time to time. Post allotment, shares will be listed on BSE. MCL will be spending Rs. 0.50 cr. for this RI process.

The issue is solely lead managed by CapitalSquare Advisors Pvt. Ltd. and Adroit Corporate Services Pvt. Ltd. is the registrar to the issue.

Post RI, MCL’s current paid-up equity capital of Rs. 13.53 cr. will stand enhanced to Rs. 63.16 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 63.16 cr. Thus its equity jumps over four times and will find it difficult for servicing it in the near term.

FINANCIAL PERFORMANCE: 
On the financial performance front, for the last two fiscals, MCL has reported total income/net profits of Rs. 0.42 cr. / Rs. 0.01 cr. (FY21) and Rs. 0.001 cr. / Rs. – (0.66) cr. (FY22). Thus it has been posting minuscule financial performance for the last two fiscals and that too with the loss for FY22.

DIVIDEND POLICY: 
The offer documents are silent on the company’s dividend policy. It will adopt a prudent dividend policy based on its financial performance and future prospects.

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 505523:
The scrip last closed on cum-right basis at Rs. 1.10 on July 07, 2022, and opened on an ex-rights basis at Rs. 1.10 on July 08, 2022. Since then it has marked a high/low of Rs. 1.13 / Rs. 1.02. The scrip last closed at Rs. 1.07 as of July 15, 2022. Based on this quote, its post-RI market cap stands at Rs. 67.58 cr. The scrip has posted the last 52 weeks high/low of Rs. 2.47 / Rs. 0.40. Promoters holding is at 13.27% for the last three quarters. The counter is well operated despite lower promoters’ holding.

Conclusion / Investment Strategy

MCL has posted minuscule financial performance for the last two fiscals. It kept changing its business model frequently. Lower promoter’s holding raises concern. Its plans for realty development hinges on cutthroat competition and the segment is fragmented. It will be difficult for the company to service its over four-fold higher equity base post-RI. There is no harm in skipping this at-par offer.

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 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