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Swiss Military Aug. 24 RI review (May apply)

Swiss Military Consumer Goods Ltd. Logo

•    The company is coming out with its 3rd Rights Issue since November 2021.
•    The company is promoting third party contract manufactured products under "Swiss Military" brand.
•    Though it posted growth in its top and bottom lines for the last two fiscals, it does not commensurate with the rise in its equity base.
•    The RI appears lucratively priced, if we consider last traded price of Rs. 30.24 as of August 22, 2024.
•    Well-informed/cash surplus investors may park moderate funds.

PREFACE:
This is the third Rights Issue from the company since November 2021. For this third RI though its prospectus is dated July 25, 2024, it was uploaded on BSE Web only on 22nd August 2024 noon. The company issued shares worth Rs. 9.83 cr. at a price of Rs. 2 per share in November/December 2021, it further issued shares worth Rs. 44.23 cr. at a price of Rs. 4.50 per share in July/August 2022, and now issuing shares worth Rs. 49.15 cr. at a price of Rs. 12.50 per share.

ABOUT COMPANY:
Swiss Military Consumer Goods Ltd. (SMCGL) is primarily engaged in the business of promoting, marketing and selling life style and consumer products of all kinds including but not limited to Travel Gear, Luggage, Home Appliances, Men's Innerwear and other allied items, under the brand "Swiss Military". 

The Company operates from its registered office located at W-39, Okhla Industrial Area, Phase-II, New Delhi 110020 and its corporate office located at 621-624, 6th Floor, JMD Megapolis, Sohna Road, Sector 48, Gurgaon-122001, Haryana. Since the company is in the business of promoting, marketing and selling products under the brand "Swiss Military, it doesn't have any plant and machinery. As of the date of this offer letter, the company had 99 employees on its payroll. 

ISSUE DETAILS:
The company is coming out with its third Rights Issue (RI) and it offered two RIs in the past in the month of November 2021 and July 2022. The company is issuing 39318798 equity shares of Res. 2 each at a price of Rs. 12.50 per share to mobilize Rs. 49.15 cr. The RI opens for subscription on August 23, 2024, and will close on September 06, 2024. The company is offering RI in the ratio of 1 for 5 to its eligible stakeholders as of the record date of August 09, 2024. The full amount is to be paid on application for the number of shares applied. Post allotment, shares will be listed on BSE. The company is spending Rs. 0.35 cr. for this RI process, and from the net proceeds, it will utilize Rs. 16.97 cr. for working capital, Rs. 24.51 cr. for investment in newly incorporated wholly owned subsidiary SM Travel Gear Pvt. Ltd., Rs. 7.00 cr. for adjustment of unsecured loans from promoter, and Rs. 0.32 cr. for general corporate purposes. 

This RI is solely lead managed by Turnaround Corporate Advisors Pvt. Ltd. and Alankit Assignments Ltd. is the registrar to the issue. 

Post-RI, company's current paid-up equity capital of Rs. 39.32 cr. will stand enhanced to Rs. 47.18 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 294.89 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, the company has (on a consolidated basis) posted a total income/net profit of Rs. 130.88 cr. / Rs. 6.18 cr. (FY23), and Rs. 189.55 cr. / Rs. 8.35 cr. (FY24). Thus while company has posted growth in its top and bottom line, it does not commensurate with the hike in its paid-up equity capital. As of March 31, 2024, its NAV stood at Rs. 3.71 (FV of Rs. 2 per share) with RoNW at 11.43%. 

DIVIDEND POLICY:
The company paid a dividend of 8% in September 2023, and paying a dividend of 5% in September 2024. 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: 523558 (FV Rs. 2).
The scrip last closed on cum-right basis at Rs. 31.62 on August 08, 2024, and opened on an ex-right basis at Rs. 26.90 on August 09, 2024. Since then, it has marked a high/low of Rs. 32.29 / Rs. 25.10. The scrip last closed at Rs. 30.24 as of August 22, 2024. For the last 52 weeks' it has posted a high/low of Rs. 32.29/ Rs. 14.38. 

The promoters' holding has been constant at 63.85% for the last three quarters ended with June 30, 2024. The counter is well managed above the RI price to lure investors. 


Conclusion / Investment Strategy

The company has marked hat trick in issuing right shares since November 2021. It posted growth in its top and bottom lines for the last two fiscals. But the earnings do not match the quantum jump in its equity capital. The company is trading in third party contracted products and selling under its own brand “Swiss Military”. Considering its latest NAV and equity base, it’s a “High Risk/Low Return” bet. Well-informed investors may park moderate funds.

Review By Dilip Davda on August 22, 2024

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, 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.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: dilip_davda@rediffmail.com ).

More Swiss Military Consumer Goods Ltd. RI Views / Analysis / Recommendations ...

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