Yug Decor BSE SME RI review (May apply)

• The company that was primarily engaged in trading of laminates and plywood has now diversified into adhesives and decorating advisory.
• It posted an average financial performance for the reported periods.
• The company is operating in a highly competitive and fragmented segment.
• Considering at par RI, investors may park funds for the medium to long term rewards.

ABOUT COMPANY:
Yug Decor Ltd. (YDL) was incorporated in the year 2003. Earlier the Company was engaged in mere trading of Laminates and plywood. In the year 2006, it had buy out manufacturing Unit (Unit I) of Water Based Adhesive from Karan Adhesives Private Limited against the consideration of Rs. 18.56 Lakh and also commence the activity of Rubber Solution/Adhesive i.e. PVA Based Adhesive, PVA Based Binder, Resin Solution and Rubber Adhesives for wood and footwear industry at Santej and due to which top line of the company was increased.

Yug Decor Limited is a young and dynamic organization manufacturing different kind of adhesives - Synthetic Binders, Synthetic Rubber Adhesives, Synthetic Resin Adhesives, Natural Rubber Adhesives, Footwear Adhesives under the brand name of YUG-COL.

The company leads the vision being the forerunner of inspiring decor and partnering with consumers to transform their living space through an interior design book of interior designers and architects, which can help them in either hiring their services or getting inspiration from them about their design concept. This concept is being presented under the brand name of 'Yug-Designs'. As on January 31, 2024 it had 91 employees on its payroll.

ISSUE DETAILS:
The company is coming out with a Rights Issue (RI) of 3596423 equity shares of Rs. 10 each at par value to mobilize Rs. 3.60 cr. The RI is opening for subscription on May 07, 2024, and will close on May 28, 2024. The company is offering RI in the ratio of 1 for 2 to its eligible stakeholders as of the record date of April 19, 2024. The full amount is to be paid on application for the number of shares applied. Post allotment, shares will be listed on BSE SME. The market lot for this company is 1150 shares. The company is spending Rs. 0.10 cr. for this RI process, and from the net proceeds, it will utilize Rs. 2.67 cr. for working capital and Rs. 0.83 cr. for general corporate purposes.

This RI is self-managed by the company itself. Satellite Corporate Services Pvt. Ltd. is the registrar to the issue. GYR Capital Advisors Pvt. Ltd. is the advisor to the issue.

Post-RI, company's current paid-up equity capital of Rs. 7.19 cr. will stand enhanced to Rs. 10.79 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 10.79 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, the company has posted a total revenue/net profit of Rs. 24.50 cr. / Rs. 0.10 cr. (FY22), and Rs. 31.27 cr. / Rs. 1.14 cr. (FY23). For H1 of FY24 ended on September 30, 2023, it earned a net profit of Rs. 0.80 cr. on a total revenue of Rs. 14.00 cr. Thus it has posted an average financial performance so far. The company has given its financial data in Rs. lakhs and Rs. 000, which appears to be an eyewash. For FY22 and FY23 it posted a PAT margins of 0.39% and 3.65% while for H1 of FY24 it posted PAT margin of 5.74%

DIVIDEND POLICY:
The company paid a dividend of 14% in September 2020 and 10% in November 2023. 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: 540550 (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 78.82 on April 18, 2024, and opened on an ex-right basis at Rs. 55.88 on April 19, 2024. Since then, it has marked a high/low of Rs. 55.88 / Rs. 37.43. The scrip last closed at Rs. 37.61 as of May 03, 2024. For the last 52 weeks' it has posted a high/low of Rs. 77.99 / Rs. 32.33. The counter is currently under ASM ST: Stage 1.

The promoters' holding has declined marginally from 70.44% as of March 31, 2023, to 69.48% as of March 31, 2024. The counter is well managed above the par value.

Conclusion / Investment Strategy

The company that was primarily in trading business has now ventured into adhesives manufacturing business. It has posted an average financial performance. The company is operating in a highly competitive and fragmented segment. However, after making maiden IPO at Rs. 26, it is offering RI at par value as a mini-bonus. Since going ex-rights, the counter has marked declining trends. Investors may park funds for the medium to long term rewards.

Review By Dilip Davda on May 5, 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. My reviews do not cover GMP market and operators game plans. Readers must consult a qualified financial advisor before making any actual investment decisions, based the on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the recent past, SME IPOs drew the attention of investors across the board and lead to seer madness. However, as SME issues have entry barriers and continued low preference from the broking community, any reader taking decisions based on any information published here does so entirely at their own risk. The above information is based on information available as of date coupled with market perceptions. 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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Yug Decor Ltd Review by Dilip Davda

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Yug Decor BSE SME RI review (May apply)

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