At a Glance
Adarsh Mercantile Ltd was once a dormant trading and investment company with <₹5 Cr in annual sales. But FY25 changed everything — it clocked ₹21 Cr revenue, ₹2.9 Cr profit, and underwent a complete promoter reshuffle via open offer and acquisition of Sai Machine Tools. From dusty ledgers to machinery dreams — is this a turnaround or trap?
1. 🧛 Introduction – The Resurrection of a BSE Deadstock?
Adarsh Mercantile was, for the longest time, the kind of stock you’d buy by accident. But now?
- ✅ Promoters exited entirely (from 74.86% to 0.37%)
- ✅ New acquirers took over with ₹42/share open offer
- ✅ FY25 saw sales jump 6.6x, profit finally appear
- ✅ Main object clause changed to manufacturing of metal fabrication machinery
Plot twist? Sai Machine Tools was merged into this BSE listing — and suddenly, this illiquid relic has a business plan.
2. 🏭 Business Model – WTF Do They Even Do?
Old Avatar (till FY24):
- Trading of shares, securities, and mutual funds
- Occasional commodity trades
- A P&L flatter than a dosa
New Avatar (FY25+):
- Acquired Sai Machine Tools in March 2025
- Planning to manufacture metal fabrication machinery
- Active in open market equity transactions still (but now more cash flow-oriented)
So basically: From sleepy holding company → industrial entity with actual manufacturing ops (allegedly).
3. 📊 Financials – Profit, Margins, ROE, Growth
| Metric | FY25 | FY24 | FY23 |
|---|---|---|---|
| Revenue | ₹21.02 Cr | ₹3.15 Cr | ₹0.51 Cr |
| Net Profit | ₹2.89 Cr | -₹1.68 Cr | -₹0.28 Cr |
| ROE | 8.10% | -4.57% | -0.76% |
| OPM | 14.6% | -51.1% | 5.88% |
🧠 TTM PAT growth: +270%
📈 Sales CAGR (3Y): +176%
🔁 ROE finally positive after 6 years!
4. 💸 Valuation – Is It Cheap, Meh, or Crack?
| Metric | Value |
|---|---|
| CMP | ₹23.4 |
| Market Cap | ₹38.6 Cr |
| P/E | 13.5x |
| Book Value | ₹38 |
| P/B | 0.61x |
👀 This is still trading at 0.6x BV, even after the transformation.
🎯 Fair Value Range: ₹30–₹38
Assuming FY26 EPS of ₹2.5–₹3 and a P/E of 12–15x.
5. 🚨 What’s Cooking – News, Triggers, Drama
- ✅ July 2025: Open offer to acquire SMT Engineering shares completed
- ✅ Mar 2025: Acquisition of Sai Machine Tools
- ✅ Apr 2025: Board approved M&A, name change, increased borrowing power
- ✅ Feb 2025: ₹42/share open offer
- ⚠️ CFO passed away Jan 2025 — replaced swiftly
This isn’t your average BSE-sleeper anymore. Major script rewrite in play.
6. 🧾 Balance Sheet – How Much Debt, How Many Dreams?
| Metric | FY25 |
|---|---|
| Equity Capital | ₹16.5 Cr (up from ₹3.68 Cr) |
| Reserves | ₹46.3 Cr |
| Borrowings | ₹51.5 Cr |
| Total Liabilities | ₹167 Cr |
| Fixed Assets | ₹18.4 Cr |
| CWIP | ₹2.37 Cr |
🚩 Huge jump in debt and equity — most likely to fund Sai Machine Tools acquisition and infra.
7. 💵 Cash Flow – Sab Number Game Hai
| Year | CFO | CFI | CFF | Net Cash |
|---|---|---|---|---|
| FY25 | -₹8.7 Cr | ₹0.22 Cr | ₹30.6 Cr | ₹22.1 Cr |
Massive cash inflow via financing — likely from preferential allotments and acquisition-linked fundraising.
8. 📐 Ratios – Sexy or Stressy?
| Ratio | FY25 | Comment |
|---|---|---|
| ROE | 8.1% | Finally decent |
| ROCE | 5.15% | Needs work |
| OPM | 14.6% | 👌 |
| Debtor Days | 371 | 🚨 Danger Zone |
| Inventory Days | 1,473 | 🤯 Suspiciously high |
| CCC | 1,329 days | 🚩🚩🚩 |
Cash conversion cycle is… hella weird. Could be non-operating assets still on books.
9. 📊 P&L Breakdown – Show Me the Money
| Year | Revenue | EBITDA | PAT |
|---|---|---|---|
| FY23 | ₹0.51 Cr | ₹0.03 Cr | -₹0.28 Cr |
| FY24 | ₹3.15 Cr | -₹1.61 Cr | -₹1.68 Cr |
| FY25 | ₹21.02 Cr | ₹3.06 Cr | ₹2.89 Cr |
FY25 is the only year with proper operational profits. Yet to see a consistent multi-quarter pattern.
10. 🔍 Peer Comparison – Who Else is in the Game?
| Company | P/E | ROE | Remarks |
|---|---|---|---|
| MSTC | 19x | 24.2% | PSU scrap auction giant |
| Redington | 20x | 14.5% | IT hardware distribution |
| BN Holdings | 115x | 8.5% | NBFC-style ops |
| Adarsh Mercantile | 13.5x | 8.1% | Undergoing transformation |
It’s not comparable to pure traders like MMTC or MSTC yet — business model still hybrid.
11. 🧠 Misc – Shareholding, Promoters, Auditors
- 📉 Promoter holding dropped from 74.86% → 0.37%
- 🧼 Open offer acquirers now in control
- 👩💼 New directors + CFO appointed in March 2025
- 🏗️ Name change and MoA alteration to reflect new manufacturing focus
- 📜 Draft Letter of Offer filed (Feb 2025)
12. ⚖️ EduInvesting Verdict™
Adarsh Mercantile is now a reincarnated shell, thanks to the reverse merger with Sai Machine Tools.
✅ Positive PAT for first time in years
✅ Fresh promoters + ₹30 Cr cash infusion
✅ Manufacturing biz being integrated
🚩 Massive inventory/days issue
🚩 No clarity on machinery orders yet
This is either:
- The next SME machinery growth story, or
- A holding company reboot with limited operating depth
Edu Verdict™:
“BSE ka sleeping beauty ab Sai Machine ka engineer ban gaya.”
Keep your eyes open. This one’s still under construction.
✍️ Written by Prashant | 📅 8 July 2025
Tags: Adarsh Mercantile, Sai Machine Tools, reverse merger, open offer, BSE smallcap, machinery stocks, shell revival, turnaround story, EduInvesting, capital goods, SME metal fabrication
