Spencer's Retail has posted a loss of Rs 25.24 crore for the quarter ended March 2020 and Rs 57 crore for the full year FY20, against profit of Rs 2.79 crore and Rs 7.94 crore in March quarter 2019 and year FY19 respectively.
The Rs 80-crore rights issue of Spencer's Retail opened for subscription on August 4. Trading in Rights Entitlement started on the same day as well.
Eligible shareholders for rights issue as per record date (which was July 29) can subscribe the issue or sell shares through Rights Entitlement or whoever wants to participate in the Rights issue can buy shares through Rights Entitlement only.
The leading multi-format omnichannel retailer aims to raise Rs 80 crore by selling 1,06,04,563 rights equity shares at an issue price of Rs 75 per share, which is a 9 percent discount to Monday's closing price.
The company will utilise the money for working capital requirements (Rs 60 crore) and rest for general corporate purposes.
The rights entitlement ratio is 2 rights equity shares for every 15 equity shares held by the eligible shareholders on the record date.
Spencer's Retail's rights issue close on August 18.
Experts are not convinced with the pricing of the issue and feel it may not be the best choice to buy. Hence, they advise eligible shareholders to exit by selling their RE shares to get some value for investment.
"With a discount of 9-10 percent to the current price, Spencer's rights issue pricing is not up to market expectations and we are watchful of its business prospects in short to medium term on the back of weak financials and a negative return on capital employed (ROCE) & return on equity (ROE) ratios," Prashanth Tapse, AVP Research at Mehta Equities told Moneycontrol.
Spencer's Retail has posted a loss of Rs 25.24 crore for the quarter ended March 2020 and Rs 57 crore for the full year FY20, against a profit of Rs 2.79 crore and Rs 7.94 crore in March quarter 2019 and year FY19 respectively. On a sequential basis, the company had also posted a loss of Rs 17.09 crore in December quarter 2019.
"We also feel the issue would be utilised for Natures Basket working capital which is suffering a loss of Rs 69 crore on a turnover of Rs 268 crore and so far we have seen that the acquisition has been a drag on Spencer's overall financial performance," he said.
Hence, considering very basic parameters and gloomy business outlook, Mehta Equities advised existing shareholders/investors to sell Rights Entitlement (RE) shares offered in the ratio of 2:15. Selling RE shares investors would get an opportunity to gain some value, he added.
Gaurav Garg, Head of Research at CapitalVia Global Research Limited- Investment Advisor also advised that one should avoid and stay away from the rights issue. "The retailer has not impressed on the fundamental ground in recent years. But promoters are hoping for restructuring via this right issue."
He feels Avenue Supermarts (D-Mart) is a good choice if investors want to take exposure in this growing sector.
According to him, Spencer's Retail might take at least 3-4 quarters to overcome the current situation. "Sented supply-chain, lower footfalls in stores with compromised margins due to COVID-19 are major challenges for the sector and for Spencer's too," he said.
The stock performance was quite strong which could be due to positive market sentiment. It gained 35 percent in the last one year and 54 percent in 2020 so far.Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.