Dipna Pharma RI review - (May apply)

•    DPL is engaged in the trading and distribution of pharma products.
•    It marked inconstancy in its top and bottom lines for the reported periods. 
•    Its business depends on third party contracts and has no own manufacturing units.
•    Though the issue is at par, well-informed/cash surplus investors may park funds for the medium term rewards. 

ABOUT COMPANY:
Dipna Pharmachem Ltd. (DPL) is engaged in the trading and distribution of wide range of pharmaceutical raw material which is also known as APIs (Active Pharmaceutical Ingredients), excipient and chemical formulation products. Presently its product portfolio comprises of 61 AIPs and AIPs intermediates such as Cephalosporins, Cardiovasculars, Anti-Bacteria, Quinolones, Veterinary, Anti-Virus, Anti-Inflammatory, Neuropsychiatry, Steroid Hormone, other etc. 

Being a trading and distribution Company, it has Pan India market for products. The Company had also started the selling of chemicals on commission basis in the financial year 2023 the Company had earned commission income of Rs. 17.53 Lakhs. The Company is doing trading in Ahmedabad and surrounding area of Ahmedabad.

Its strength lies in understanding the requirements of the customer and its execution capabilities. This has enabled it to get repeated orders from existing customers and attract new customers. An active ingredient is the ingredient in a pharmaceutical drug or pesticide that is biologically active. The similar terms active pharmaceutical ingredient and bulk active are also used in medicine, and the term active substance may be used for natural products. Its top 10 buyers and suppliers tally has marked de-growth for the last three fiscals. As of September 30, 2023, it had 13 employees on its payroll. 

ISSUE DETAILS:
The company is coming out with a Rights Issue (RI) of 12967500 equity shares of Rs. 10 each at a par value to mobilize Rs. 12.97 cr. The issue opens for subscription on February 26, 2024, and will close on March 27, 2024. The company is offering RI in the ratio of 13 for 12 to its eligible stakeholders as of the record date of February 12, 2024. The full amount it to be paid on application for the number of shares applied. Post allotment, shares will be listed on BSE. The company is spending Rs. 0.25 cr. for this RI process, and from the net proceeds, it will utilize Rs. 10.00 cr. for working capital, and Rs. 2.75 cr. for general corporate purposes. Here also we have some mismatch, which appears to be a rounding off error (refer page no.  45 of the offer document).

The issue is self-managed by the company and Bigshare Services Pvt. Ltd. is the registrar of the issue. 

Post-RI, company's current paid-up equity capital of Rs. 11.97 cr. (11970000 shares) will stand enhanced to Rs. 24.94 cr. (24937500 shares). Based on the RI pricing, the company is looking for a market cap of Rs. 24.94 cr. There is an error in offer document on post-RI paid up capital information on page no. 37. 

What is more surprising, the company has given projections for FY24 and FY25 i.e. forward looking statements, which is prohibited by SEBI. (See page 47-48 of the offer document). 

FINANCIAL PERFORMANCE:
ON the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 31.02 cr. / Rs. 0.02 cr. (FY21), Rs. 72.77 cr. / Rs. 1.17 cr. (FY22), and Rs. 99.93 cr. / Rs. 0.91 cr. (FY23). Thus it marked inconsistency in its bottom lines for the reported periods and indicating declined margins for FY23. 

For H1of FY24 ended on September 30, 2023, it had earned a net profit of Rs. 0.5 cr. on a total income of Rs. 74.18 cr. It has thus posted further decline in net profits. 

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It has already adopted 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: 543594 (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 15.22 on February 09, 2024, and opened on an ex-right basis at Rs. 12.52 on February 12, 2024. Since then, it has marked a high/low of Rs. 14.53 / Rs. 11.90. The scrip last closed at Rs. 13.00 as of February 23, 2024. For the last 52 weeks' it has posted a high/low of Rs. 24.13 / Rs. 8.22. 

The promoters' holding has declined from 66.56% as of September 30, 2022, to 57.19% of Sept. 30, 2023. The counter is well managed above the par value to lure investors.