Before we begin, let’s understand what is a right’s issue? Normally existing listed company can raise money either in FPO or rights issue, company raises money from existing shareholders to further invest in the company is a rights issue, this is totally different from a FPO where it’s offered to the general public like YES BANK has done which is similar to IPO.

Company background

Mahindra & Mahindra Financial services limited is a NBFC based out of Mumbai is part of huge Mahindra & Mahindra group which has a strong presence in rural areas. It covers a wide range of areas in terms of offerings such as Fixed Deposit, Mutual funds, Insurance, Loans on vehicles, and business loans. It has great exposure in terms of foreign investments in US & Srilanka.

Financials

Results of the last quarter i.e Q1 2020 was released on 18th , the parent company has performed exceedingly well though there has been in Degrowth in terms of profit from last year in few subsidiaries but overall it has worked well with an increase in PAT of 300%  standing at 432 CR  against 108 CR.

There has been few intresting changes has made in this compared to other quarters like the financing on CV, pre owned vehicles have reduced . Earning per share has also increased by 7x though there is a huge concern for the huge provisions arising due to the pandemic , operating expenses has also been reduced by more than 1000 cr . Overall the winds seems to moving in their favour .

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Looking at the share trading below , company has started correcting itself by more than 20 % post the lock-down has been lifted even has further corrected in a single day by 10.44 % on 20 th july .

The next quarter is high on festivals, monsoon is also hitting very well in the rural area’s this year  and is above average , crop yield support price have improved & rural sentiments are supposed to be positive also there has been extra provision that have been made for upcoming month as per the the MD of the company in a press conference

https://www.tradingview.com/x/PsctEEId/

Rights issue details

Price

Rs 2 (face value) + Rs 48 ( premium) = Rs 50

Share issue distribution Ratio

1:1  (if you already own a share then you are eligible to apply for another)

Record date

23 rd July 2020 ( cutoff date of share allocation eligibility )

Issue period

Opening date  – 28th JULY 2020
Closing date  – 11th August 2020

Share outstanding

Pre rights issue – 61,77.64,960 / Post rights issue – 123,55,29,920

Process for buying

The best way to buy is via ASBA (Applications Supported by Blocked Amount)  or via Karvy Fintech platform link will be updated soon. In both, the methods amount will be blocked against the number of shares.

Recommendation

Absolutely no brainer, profits are looking good despite huge provisions, the stock should correct itself in the region of 250 with the cutoff date being on a later date in this month. There’s going to a huge buying of shares in the next few days and 1:1 share allocation eligibility tops it well , won’t be surprised if it hits the upper circuit in coming few days also price shall drop in the range of 150-175 once the shares are allocated , mainly because of the pressure from shareholders

Excellent for a short term trade with the potential to earn 40-60 % in the next 25-30 days.

SMACKMAC

SMACKMAC

Business Journalist - expertise in IPO, FPO , Rights issue , NCD , fundamental stock analytics for last 2-3 years . Part-time Football & F1 fan . Highly indulged in Tech product as well

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