SEPC Dec. 23 RI review (Avoid)

• This is the 2nd RI since March 2023. The last RI was at par value.
• This RI is at a price of Rs. 13 per share making it a costly bet.
• Though it has turned the corner for H1 of FY24, carried forward losses are major concerns.
• The counter is well operated and kept above RI price around the issue time.
• Shriram tag is the only plus point for a while.
• There is no harm in skipping this High Risk/Low Return bet.

ABOUT COMPANY:
SEPC Ltd. (SEPC) -erstwhile known as Shriram EPC Ltd.- is an ISO 9001-2015 QMS DAkkS, ISO 9001-2015 QMS NABCB, ISO 45001-2018 DAkkS & ISO 14001- 2015 EMS DAkkS certified Engineering Procurement and Construction Company (EPC Contractor) engaged in the business of executing turnkey contracts in Engineering, Procurement, and Construction (EPC) and providing end-to-end solutions offering multi-disciplinary services and project management solutions.

The Company is an Engineering, Procurement, and Construction (EPC) end-to-end solutions provider offering multi-disciplinary services and project management solutions. SEPC Limited ("SEPC") is focused on providing turnkey solutions in the business area like - 1. Infrastructure that covers - Water & Sewer, Road and 2. Process and Metallurgy that includes Process Plants, Steel Plants, Mine Development, and Power Plants.

In the year 2008 the company made its maiden initial public offering of 50,00,000 Equity Shares of face value Rs. 10 each for issue price of Rs. 300/- each aggregating to Rs. 1500 cr.

Equity Shares of the Company got listed on BSE & NSE. The market capitalization (Full) of the Company as of September 30, 2023 on BSE and NSE was Rs. 1813.03 cr. and Rs. 1810.29 cr. respectively.

The Company is responsible for design, procurement, construction and commissioning of projects on turnkey basis and the main resource comprising of Engineers and employees specialized in a dedicated sector who offer appropriative solutions for a project in a cost-effective way. In addition, the company has a suite of software on project management control like MS Project, Primavera, design software like AutoCADD, Teckla, StaadPro etc. It also owns batching plants, equipment for civil construction and Material handling equipment like cranes, hydra etc. Further, the Company also owns shaft sinking equipment which are specialized equipment for mine development. As of September 30, 2023, it had 239 employees on its payroll.

ISSUE DETSEPCS:
The company is coming out with its 2nd Rights Issue (RI) since March 2023. This RI is of 38384615 shares of Rs. 10 each at a fixed price of Rs. 13 per share to mobilize Rs. 49.90 cr. The issue opens for subscription on December 06, 2023, and will close on December 18, 2023. It is issuing RI in the ratio of 1 for 36 to eligible stakeholders as of the record date of November 28, 2023. The full amount it to be paid with application for the number of shares applied. Post allotment, shares will be listed on BSE and NSE. SEPC is spending Rs. 0.67 cr. for this RI process and from the net proceeds, it will utilize Rs. 47.00 cr. for working capital, and Rs. 2.23 cr. for general corporate purposes.

The RI is self-managed by the company itself and Cameo Corporate Services Ltd., is the registrar of the issue.

Post-RI, SEPC's current paid-up equity capital of Rs. 1371.43 cr. will stand enhanced to Rs. 1409.81 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 1832.76 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, SEPC has posted a total income/net profit/ - (loss) of Rs. 606.13 cr. / Rs. - (179.47) cr. (FY21), Rs. 340.59 cr. / Rs. - (263.70) cr. (FY22), and Rs. 398.88 cr. / Rs. - (4.90) cr. (FY23). For the H1 of FY24 ended on September 30, 2023, it posted a net profit of Rs. 10.58 cr. on a total income of Rs. 284.63 cr.

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

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 532945 (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 20.51 on November 24, 2023, and opened on an ex-right basis at Rs. 20.30 on November 28, 2023. Since then, it has marked a high/low of Rs. 20.65 / Rs. 18.52. The scrip last closed at Rs. 19.33 as of December 01, 2023. For the last 52 weeks' it has posted a high/low of Rs. 26.00 / Rs. 7.38.

The promoters' holding has been varying. It was 29.60 as of May 04, 2023, 26.66% for period ended June 30, 2023, and 27.75% for period ended September 30,02023.

The counter gets managed well above the RI price around the issue time by vested interest quarters to lure investors.

Conclusion / Investment Strategy

The counter is currently under ASM Stage 1 and is well managed above the RI price to lure investors. This is the 2nd RI within 9 months’ period. It has posted listless performance so far with losses and has higher capital base. Shriram tag is the only plus point for a while. Post-RI, hike in its paid-up capital at high level indicates longer gestation for servicing. Though it has posted turnaround for H1 of FY24, based on its negative NAV, there is no harm in skipping this High Risk/Low Return RI.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on December 1, 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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SEPC Limited Review by Dilip Davda

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

SEPC Dec. 23 RI review (Avoid)

Conclusion / Investment Strategy

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