North Eastern Carrying RI review (Avoid)

• NECCL is engaged in the logistics business on a Pan India basis and in Nepal.
• It has posted inconsistency in its top and bottom lines for the reported periods.
• The issue is fully priced discounting all near-term positives.
• There is no harm in skipping this pricey RI.

ABOUT COMPANY:
North Eastern Carrying Corporation Ltd. (NECCL) is engaged in logistics in India. Spanning over five decades of services, it has a network of 187 branches including franchises for handling transportation and supply chain solutions throughout India and Nepal. The company is engaged in the transportation of goods catering to various industries like FMCG, Steel, Construction, Infrastructure etc.

It has a strong customer base and is relied on by clients for qualitative, time-oriented and damage-free transportation services. The company has an in-house preventive maintenance department wherein regular remedial measures are taken for its fleet, which mainly includes regular checking of tyre quality and servicing of key components of the trucks it operates. Further, the company also maintains a proper stock of spare parts and components of vehicles to meet any exigency.

NECCL was incorporated on December 05, 1984, as a part load service between Delhi and the difficult and most remote parts in the east and northeast of India. It soon became a renowned name amongst traders for the safety of goods and prompt services. The company has always put forth the interests of its clients and to date has been trying to follow the same principles.

NECCL has always been a preferred logistics partner for most of the reputed organizations throughout India. Over the last decades, it has transformed from a PTL player to a full-fledged logistics company while gaining not just customers but also the reputation of being one of the most reliable transportation companies and giving turnkey solutions for all logistics needs. Today, the NECCL family comprises Hundreds of employees and associated vendors offering their services throughout India, Nepal & Bhutan.

ISSUE DETAILS:
The company is coming out with a Rights Issue (RI) of 45177602 equity shares of Rs. 10 each at a fixed price of Rs. 18 per share to mobilize Rs. 81.32 cr. NECCL is offering RI in the ratio of 9 shares for every 10 shares held to eligible stakeholders as of the record date of June 02, 2023. The issue opens for subscription on June 14, 2023, and will close on June 27, 2023. The company is asking for Rs. 9 per share on the application and the balance by the first and final call as determined by the company from time to time. Post allotment, shares will be listed on BSE and NSE. NECCL is spending Rs. 1.00 cr. for this RI process and from the net proceeds, it will utilize Rs. 64.47 cr. for the construction and development of the warehouse, and Rs. 15.85 cr. for general corporate purposes.

Capital Square Advisors Pvt. Ltd. is the sole lead manager and Purva Sharegistry (India) Pvt. Ltd. is the registrar of the issue.

Post-RI, NECCL's current paid-up equity capital of Rs.50.20 cr. will stand enhanced to Rs. 95.38 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 171.68 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, NECCL has posted a turnover/net profit of Rs. 378.20 cr. / Rs. 6.39 cr. (FY20), Rs. 232.74 cr. / Rs. 1.43 cr. (FY21), Rs. 250.86 cr. / Rs. 4.26 cr. (FY22). For 9M of FY23 ended on December 31, 2022, it earned a net profit of Rs. 4.88 cr. on a turnover of Rs. 232.99 cr. It suffered a setback in the pandemic year FY21 and thereafter made a slow and steady recovery.

Its financial liabilities were at Rs. 136.90 cr. which raises concern, while its NAV was Rs. 20.71 per share, as of December 31, 2022.

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

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 534615 (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 21.31 on June 01, 2023, and opened on an ex-right basis at Rs. 20.82 on June 02, 2023. Since then, it has marked a high/low of Rs. 21.44 / Rs. 19.42. The scrip last closed at Rs. 19.53 as of June 09, 2023. For the last 52 weeks, it has posted a high/low of Rs. 28.52 / Rs. 13.20.

The promoters' holding has been constant at 52.67% for the last three quarters ended on March 31, 2023. The counter is well-managed above the RI price to lure investors.

Conclusion / Investment Strategy

Though this RI is below its NAV as of December 31, 2022, poor financial performance raises concern. The company is in a highly competitive and fragmented segment. A quantum jump in its post-RI equity base may pose servicing issue. Based on its financial performance, the issue is fully priced discounting near-term positives. There is no harm in skipping this pricey offer.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on June 10, 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 the information published here. My reviews do not cover GMP market and operators game plans. Any reader taking decisions based on any information published here does so entirely at their 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.

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.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: dilip_davda@rediffmail.com ).

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North Eastern Carrying Corporation Limited Review by Dilip Davda

The North Eastern Carrying Corp. Rights Issue 2023 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 North Eastern Carrying Corp. Rights Issue 2023 worth investing. The North Eastern Carrying Corp. Rights Issue 2023 Note sets the Rights Issue expectations in systematic way which tells you if North Eastern Carrying Corp. Rights Issue 2023 good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in North Eastern Carrying Corp. Rights Issue 2023 by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.

North Eastern Carrying RI review (Avoid)

Conclusion / Investment Strategy

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