Whalesbook
📉 The Financial Deep Dive
Nexome Capital Markets Limited is seeking to raise up to ₹25 Crores via a Rights Issue, a move necessitated by a sharp deterioration in its financial performance during the fiscal year ended March 31, 2025 (FY25).
The Numbers: Consolidated revenue plummeted by a staggering 81.5% year-on-year, falling to ₹4441.02 lakhs (₹44.41 Crores) in FY25 from ₹23986.46 lakhs (₹239.86 Crores) in FY24. Correspondingly, consolidated Profit After Tax (PAT) saw a 52% decline, dropping to ₹116.65 lakhs (₹1.17 Crores) from ₹240.91 lakhs (₹2.41 Crores) in the prior year. Basic Earnings Per Share (EPS) consequently decreased to ₹2.04 from ₹4.31, and the Return on Net Worth (RoNW) contracted significantly to 1.07% from 2.36% in FY24.
The Quality: Compounding these performance issues, Nexome Capital Markets witnessed a dramatic increase in its total borrowings, which surged from ₹9.31 lakhs in FY24 to ₹300.20 lakhs in FY25 – a rise of over 3200%. This escalating debt load, coupled with shrinking profitability, presents a significant concern.
The net proceeds from the proposed Rights Issue are earmarked for investment in shares, securities, and mutual funds, to meet SEBI's liquid net worth requirements for merchant bankers, and for general corporate purposes. The promoters have committed to subscribing to their entitlements and potentially more if the issue is undersubscribed, subject to public shareholding norms.
The Grill: While the filing details the need for capital infusion and promoter commitment, it doesn't provide specific reasons for the severe revenue and profit contraction. Investors will be scrutinizing management's commentary for explanations on demand, market conditions, and strategies to reverse the declining trend.
🚩 Risks & Outlook
Specific Risks: The substantial increase in borrowings alongside declining profitability is a major red flag. The use of funds for investment in securities and meeting regulatory net worth requirements indicates potential liquidity challenges or strategic shifts necessitated by market pressures. Past regulatory actions, including SEBI penalties for non-disclosure (though reduced by SAT) and earlier issues with its Merchant Banker Certificate, hint at potential governance or compliance risks that investors must consider. The dilution from a Rights Issue, especially when investing in volatile securities, adds another layer of risk.
The Forward View: Investors will be looking for clarity on the operational performance drivers that led to the FY25 decline and the concrete steps management plans to undertake to improve profitability and manage debt. The success of the Rights Issue and the subsequent deployment of funds will be critical in assessing the company's recovery trajectory. The minimum public shareholding requirements add a constraint on promoter subscription flexibility.