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• GGEL is in the business of manufacturing and supplying genset and related services.
• Its FY23 performance raise eyebrows and concern over the sustainability.
• Though this RI is at par, it is 2nd RI from the company within 12 months.
• Promoter's holding is just 1.93% and poses a big concern. The counter is operated by vested interest parties.
• Simply stay away from this "High Risk/No Return" RI.
PREFACE:
GGEL came with its maiden IPO of Rs. 2.23 cr. at a price of Rs. 20 per share (FV Rs. 10) in July 2017. Post listing, it gave bonus shares in the ratio of 2 for 3 in June 2019, stock split from Rs. 10 to Rs. 2 in June 21, and again it split from Rs. 2 to Re. 1 in June 22. It came with its 1st RI in August 2022 at a price of Rs. 1.80 (FV Re.1) to mop up Rs. 49.96 cr. (ratio 35 for 13), and is now coming with its 2nd RI to raise Rs. 49.88 cr. (ratio 38 for 29). At the time of the IPO, Navigant Corporate Advisors Pvt. Ltd. was the Lead Manager. Thus it is a frequent fundraiser with inconsistent performance so far. The company has not disclosed the name of the advisor to the issue, which is really strange and appears to be the suppression of the info and missing transparency.
ABOUT COMPANY:
GG Engineering Ltd. (GGEL) is manufacturing and supplying quality sheet metal and heavy steel products. It specializes in custom-built enclosure generator sets for both stationary and mobile applications. Its latest series is equipped with engines applying quantum techniques that lead to enhancing durability and stability. The company also supplies steel pipes, industrial engines for various applications, marine engines, and spare parts for diesel genset to the local and international markets.
Inspired by the Swachh Bharat Abhiyan, GGEL launched India's first fully automated and smart reverse vending machines (RVMs) to enable environment-friendly disposal of plastic and other waste as users get rewards in return. Further, the company has launched the latest pathogen-protection products in the wake of the COVID-19 pandemic to empower people, communities and organizations to defend against the novel coronavirus and other deadly pathogens. As of the date of this offer document, it had 6 employees on its payroll.
ISSUE DETAILS:
The company is coming out with its 2nd rights issue (RI) of 498820215 equity shares of Re.1 each at par value to mobilize Rs. 49.88 cr. The subscription opens on July 20, 2023, and will close on July 31, 2023. The company is offering RI in the ratio of 38 shares for every 29 shares held by the eligible stakeholders as of the record date of July 11, 2023. The full amount is to be paid on an application for the number of shares applied. Post allotment, shares will be listed on BSE. GGEL is spending Rs. 0.48 cr. for this RI process, and from the net proceeds, it will utilize Rs. 37.10 cr. for working capital, and Rs. 12.30 cr. for general corporate purposes.
This RI is self-managed by the company and KFin Technologies Ltd. is the registrar of the issue.
Post-RI, GGEL's current paid-up equity capital of Rs. 38.07 cr. will stand enhanced to Rs. 87.95 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 87.95 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, GGEL has (on a consolidated basis) posted a turnover/net profit - (loss) of Rs. 37.51 cr. / Rs. - (0.82) cr. (FY21), Rs. 22.97 cr. / Rs.0.40 cr. (FY22), and Rs. 110.83 cr. / Rs. 8.61 cr. The sudden boost in its top and bottom lines for FY23 raises eyebrows and concern over the sustainability going forward as it is operating in a highly competitive and fragmented segment.
Since going public, this company's equity will go around 80% of its top line post-RI and may post capital servicing issues.
DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. 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: 540614 (FV Re. 1).
The scrip last closed on cum-right basis at Rs. 1.23 on July 10, 2023, and opened on an ex-right basis at Rs. 1.17 on July 11, 2023. Since then, it has marked a high/low of Rs. 1.27 / Rs. 1.13. The scrip last closed at Rs. 1.19 as of July 19, 2023, for the last 52 weeks it has posted a high/low of Rs. 3.16 / Rs. 0.74.
The promoters' holding has been constant at 1.93% for the last two quarters, which ended on June 30, 2023. The counter is well managed above the par value by vested interest parties to lure investors for this RI.
Review By Dilip Davda on July 19, 2023
DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on the information published here. My reviews do not cover GMP market and operators game plans. Any reader taking decisions based on any information published here does so entirely at their own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.
About Dilip Davda
Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.
Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.
(Dilip Davda -SEBI registered Research Analyst-Mumbai,
Registration no. INH000003127 (Perpetual)
Email id: dilip_davda@rediffmail.com ).
The G G Engineering Rights Issue 2023 Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered Rights Issue Analysts tells you if G G Engineering Rights Issue 2023 worth investing. The G G Engineering Rights Issue 2023 Note sets the Rights Issue expectations in systematic way which tells you if G G Engineering Rights Issue 2023 good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in G G Engineering Rights Issue 2023 by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.
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