Eiko Lifesciences RI review - (Avoid)

•    ELL is in the business of various types of chemicals and pharma intermediates.
•    Its financial performance has been average so far. 
•    Promoter's holding of around 23% remains a major concern.
•    The counter is maintained above RI pricing to lure investors.
•    The issue is greedily priced. there is no harm in skipping this pricey bet.

ABOUT COMPANY:
Eiko Lifesciences Ltd. (ELL) - (erstwhile known as Narendra Investments (Delhi) Ltd.) - is a manufacturer, supplier and exporter of Speciality Chemicals, fine chemicals, Pharma Intermediates etc. It has successfully ventured into the business of manufacturing, processing, formulating, producing, buying, selling, and exporting Speciality and Fine Chemicals. Its products find application in a host of Agrochemical, Personal Care industries, and food industries. 

The company commenced commercial production in October 2020 from a manufacturing facility located at Badlapur, Maharashtra and has since scaled operations, and grown its brand and customer base to become one of the fastest growing speciality chemicals companies in India. The key products manufactured by it are used in pharmaceutical and agrochemical industries with various end-use applications including corrosion control, photographic chemicals, solvents, and corrosion inhibitors amongst others. 

The company's philosophy right from its inception has always remained focused on in-house product development and launching the same for domestic or overseas markets. ELL is a pioneer in most of the products being currently manufactured by it. The R&D Centre of the company not only works on the development of new products but is also focused on the continuous upgradation of processes for improving quality and cost. The cost reduction is brought about by improving process efficiency, the use of innovative catalysts, and savings in utilities and energy costs. The company also focuses on enhancing value addition by way of backward and forward integrations. Its manufacturing facilities are designed in such a manner that there is total fungibility for manufacturing various products as per the market requirements.

Additionally, it has also tied up with other companies for manufacturing products on a Job Work basis. The said job work is as per ELL's specifications and quality standards. Also, the company has entered into a strategic partnership with various entities for the development, sourcing and supply of products which are currently not manufactured by it. The offer document is silent on its employee's strengths. 

ISSUE DETAILS:
The company is coming out with a Rights Issue (RI) of 5544178 equity shares of Rs. 10 each at a fixed price of Rs. 45 per share to mobilize Rs. Rs. 24.95 cr. The issue opens for subscription on July 17, 2023, and will close on July 26, 2023. The company is asking for Rs. 13.50 on application and the rest of Rs. 31.50 by one or more subsequent calls as determined by ELL from time to time. The company is offering RI in the ratio of 2 for every 3 shares held by the eligible stakeholders as of the record date of July 07, 2023. Post allotment, shares will be listed on BSE. ELL is spending Rs. 0.45 cr. for this RI process and from the net proceeds, it will utilize Rs. 18.31 cr. (??) for working capital and Rs. 6.13 cr. for general corporate purposes. There is a mismatch in its total fund mobilization and utilization info data. (refer to page no. 145 (4) of the offer document).

PNB Investment Services Ltd. is the sole lead manager and Bigshare Services Pvt. Ltd. is the registrar of the issue. 

Post RI, ELL's current paid-up equity capital of Rs. 8.32 cr. will stand enhanced to Rs. 13.86 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 62.37 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, ELL has posted a turnover/net profit of Rs. 12.45 cr. / Rs. 0.61 cr. (FY21), Rs. 26.09 cr. / Rs. 0.71 cr. (FY22), and Rs. 19.18 cr. / Rs. 0.77 cr. (FY23).  While its top line marked a decline, its bottom line improved for FY23 following higher other income. As of March 31, 2023, its current paid-up equity capital of Rs. 8.32 cr. is supported by free reserves of Rs. 21.11 cr. 

DIVIDEND POLICY:
The offer document is silent on its dividend policy. It will adopt 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: 540204 (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 67.51 on July 06, 2023, and opened on an ex-right basis at Rs. 55.61 on July 07, 2023. Since then, it has marked a high/low of Rs. 61.45 / Rs. 52.00. The scrip last closed at Rs. 54.30 as of July 14, 2023. For the last 52 weeks, it has posted a high/low of Rs. 87.57 / Rs. 30.56. 

The promoters' holding has perhaps increased from 14.68% (September 30, 2022) to 23.73% (March 31, 2023).  under market operations to sustain its quote above the RI price to lure investors for this greedily priced issue.