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G G Engg RI review (Avoid)

G G Engineering Limited Logo

•    GGEL is in the sheet mater and heavy steel products. 
•    It has posted dismal financial performance so far. 
•    In the last three-quarters promoters' holding has declined from 43.88% to 1.88%.
•    The issue is greedily priced considering the loss posted for Q1 of FY23.
•    There is no harm in ignoring this pricy RI. 

ABOUT COMPANY:
G G Engineering Ltd. (GGEL) is in the business of manufacturing/marketing quality sheet metal and heavy steel products. The company specializes in custom-built enclosure generator sets for both stationary and mobile applications. It also supplies steel pipes, industrial engines for various applications, marine engines, and spare parts for diesel Genset to the local and international markets. 

GGEL launched India's first fully automated and smart Reverse Vending Machines to enable environment-friendly disposal of plastic and other waste. It recently launched pathogen-protection products to fight the pandemic. As of the date of filing this offer document, it had 6 employees on its payroll. 

ISSUE DETAILS:
To part finance its plans for working capital (Rs. 36.90 cr.) and general corporate purposes (Rs. 12.31 cr.), GGEL is coming out with a right issue (RI) of 277578135 equity shares of Re. 1 at a fixed price of Rs. 1.80 per share to mobilize Rs. 49.96 cr. The company is offering the right issue in the ratio of 35 shares for every 13 shares held by the stakeholders as of the record date of August 10, 2022. The full amount is to be paid along with the application. The issue opens for subscription on August 22, 2022, and will close on September 07, 2022. Post allotment, shares will be listed on BSE. GGEL is spending Rs. 0.75 cr. for this RI process. 

There is no merchant banker and the issue is handled by the company itself. KFin Technologies Pvt. Ltd. is the registrar to the issue. 

The company issued bonus shares in the ratio of 2 for 3 in June 2019 and also split its shares from Rs. 10 FV to Re. 1 FV in the last two fiscals. 

Post-RI, GGEL's current paid-up equity capital of Rs. 10.31 cr. will stand enhanced to Rs. 38.07 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 68.52 cr. 

FINANCIAL PERFORMANCE: 
On the financial performance front, for the last two fiscals, GGEL has (on a consolidated basis) posted turnover/net profits - (loss) of Rs. 37.51 cr. / Rs. - (0.82) cr. (FY21) and Rs. 22.97 cr. / Rs. 0.44 cr. (FY22).

As per BSE filing, the company has (on a consolidated basis) posted a net profit of Rs. 0.59 cr. on a turnover of Rs. 12.41 cr. However, it has posted losses for FY22 and Q1 of FY23 on a standalone basis. It appears that the company has done window dressing in its consolidated performance. 

DIVIDEND POLICY:
The offer documents are silent on the company's dividend policy. It will adopt a prudent dividend policy post listing of RI, based on its financial performance and future prospects. 

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 540614:
The scrip last closed on cum-right basis at Rs. 3.09 on August 05, 2022, and opened on an ex-right basis at Rs. 2.36 on August 08, 2022. Since then it has marked a high/low of Rs. 3.27 / Rs. 2.36. The scrip last closed at Rs. 3.27 as of August 18, 2022. Based on this quote, its post-RI market cap stands at Rs. 124.48 cr. The scrip has posted the last 52 weeks high/low of Rs. 8.79 / Rs. 1.55 (post adjustment of Ex-RI impact). Promoters' holding has declined from 43.28% as of December 31, 2021, to 1.88% as of June 30, 2022. Thus, promoters' holding below 2% raises concern. The counter is well managed by vested interests to lure investors to this RI.


Conclusion / Investment Strategy

The company has posted dismal financial performance so far. Promoters’ holding has come to a minuscule level below 2% and it is a major worry. The counter is well managed by vested interest to lure investors to this RI. There is no harm in skipping this greedily-priced RI.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Aug 18, 2022

Review Author

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 information published here. Any reader taking decisions based on any information published here does so entirely at its 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.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

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.

Email: dilip_davda@rediffmail.com

More G G Engineering Limited RI Views / Analysis / Recommendations ...

The G G Engineering Rights Issue 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 worth investing. The G G Engineering Rights Issue Note sets the Rights Issue expectations in systematic way which tells you if G G Engineering Rights Issue good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in G G Engineering Rights Issue by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.


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