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Gennex Lab RI review (May apply)

Gennex Laboratories Limited Logo

•    GLL is in the business of manufacturing APIs.
•    Despite over 97% capacity utilization, its financial performance is average.
•    Low promoter holding raises concern.
•    Issue is aggressively priced based on its financial data.
•    Risk seeker/cash surplus investors may park funds for the long term.

ABOUT COMPANY: 
Gennex Laboratories Ltd. (GLL) is engaged in the manufacture of Active Pharmaceutical Ingredients that are regularly referred to as bulk drugs. The manufacturing unit is located in IDA Bollarum, Hyderabad, Telangana, India. 

The installed capacity of the plant is 600 TPA of which more than 95% is the current capacity utilization. The plant, located on around 2.2 acres of land is owned by the Company since the year 1995. The Company is also an ISO 14001:2015 and ISO (OHSAS) 45001:2018 certified. It also has got WHO GMP certificate issued in the year 2020 and valid for a period of three years, for six of its products.

The Company has obtained a drug licence for about fifteen active pharma ingredients of which it is focused on and manufacturing around eight of them that are used in expectorants, muscle relaxants, anti-depressants, anti-fungal, urinary tract analgesics and other analgesics. The four major products are Guaifenesin, Methocarbamol, Fluconazole and Phenazopyridine HCL which contribute to almost 97% of the total production quantity. Guaifenesin and Methocarbamol together contribute to more than 90% of the production quantity. The remaining products are manufactured and supplied on-demand basis. As of the date of filing this offer document, it had 103 employees on its payroll.

ISSUE DETAILS:
To part finance its needs for working capital (Rs. 15 cr.), repayment of borrowings (Rs. 16 cr.), further investment in Deccan Remedies (Rs. 1 cr.) and general corporate purposes (Rs. 5.40 cr.), GLL is coming out with a right issue (RI) of 63251500 equity shares of Re. 1 each at a fixed price of Rs. 6 per share to mobilize Rs. 37.95 cr. The company is issuing RI in the ratio of 1 share against 2 shares held by the eligible stakeholders as of the record date i.e. July 22, 2022. The issue opens for subscription on August 05, 2022, and will close on August 19, 2022. Rs. 1.50 per share is payable on application and the rest by call as and when demanded by the company. Post allotment, shares will be listed on BSE. The company is spending Rs. 0.55 cr. for this RI process. 

The issue is solely lead managed by Quintessence Enterprises Pvt. Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue.

Post RI, GLL's current paid-up equity capital of Rs. 12.65 cr. will stand enhanced to Rs. 18.98 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 113.85 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, GLL has (on a standalone basis) posted turnover/net profits of Rs. 60.17 cr. / Rs. 4.04 cr. (FY21) and Rs. 62.60 cr. / Rs. 3.92 cr. (FY22). 

As of March 31, 2022, its current paid-up equity capital of Rs. 12.65 cr. is supported by reserves worth Rs. 31.35 cr. 

DIVIDEND POLICY:
The company last paid a dividend of 10% in September 2001 and thereafter it skipped. 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: 531739:
The scrip last closed on cum-right basis at Rs. 6.96 on July 20, 2022, and opened on an ex-right basis at Rs. 7.00 on July 21, 2022. Since then it has marked a high/low of Rs. 7.05 / Rs. 6.43. The scrip last closed at Rs. 6.48 as of August 02, 2022. Based on this quote, its post-RI market cap stands at Rs. 122.96 cr. The scrip has posted last 52 weeks high/low of Rs. 12.26 / Rs. 5.75. Promoters holding is at 22.05% for the last three quarters. The counter is well operated despite the lower holding of promoters. 


Conclusion / Investment Strategy

Despite over 97% capacity utilization, it has posted an average financial performance indicating higher competition and pressure on margins. Considering the current market price, which appears to have been maintained above RI pricing to lure investors, risk seeker/cash surplus investors may consider parking funds for the long term.

Review By Dilip Davda on Aug 2, 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 Gennex Laboratories Limited RI Views / Analysis / Recommendations ...

The Gennex Laboratories Rights Issue 2022 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 Gennex Laboratories Rights Issue 2022 worth investing. The Gennex Laboratories Rights Issue 2022 Note sets the Rights Issue expectations in systematic way which tells you if Gennex Laboratories Rights Issue 2022 good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in Gennex Laboratories Rights Issue 2022 by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.


3 Comments

3. Rajat Agarwal   I Like It. | Report Abuse |   Link | Aug 16, 2022 12:23:42 PM Reply
I am having account with Bonanza. How can I apply for right issues. I am holding shares of General lab. I need to apply for online right issues.
2. dharmendra kumar   I Like It. | Report Abuse |   Link | Aug 11, 2022 10:50:53 AM Reply
i got 150 shares in gennex lab in upstox , how should i get it registerd for right issues
1. Pratibha Kallurkar   I Like It. | Report Abuse |   Link | Aug 11, 2022 9:10:42 AM Reply
I am having account with Zerodha. How can I apply for right issues. I am holding 230 shares of General lab. I need to apply for online right issues.