GI Engg RI review (Avoid)

• GIESL is in the business of trading of materials for constructions/infrastructures.
• It marked a minuscule top line with losses from FY20 to FY22.
• Bumper 9m of FY23 performance raise eyebrows.
• There is no harm in skipping this at-par issue that can be termed as a "High Risk-Low Return" bet.

ABOUT COMPANY:
GI Engineering Solutions Ltd. (GIESL) though incorporated in August 2006, is now the new entity after the takeover and amalgamation of a division of Genesys International Corporation Ltd. The main objects of GIESL are providing information technology based Engineering Services, development of software and software programmes, distribution and supply of and generally deal in all forms of electrical power/energy, trading of materials for construction and infrastructure development such as steel products comprising of TMT bars, girders, and hollow sections; Pipes & Tubes; pipes & plumbing systems; electrical conduits, switches, circuit breakers etc.; irrigation pipes and sprinkler systems, drip irrigation systems and hybrid irrigation systems, bore well pumps etc.; and rainwater harvesting systems, trading of commodities.

Presently, it is engaged in the business of trading in materials for construction and infrastructure development such as steel products comprising of TMT bars, girders, and hollow sections; Pipes & Tubes; pipes & plumbing systems; electrical conduits, switches, circuit breakers etc.; irrigation pipes and sprinkler systems, drip irrigation systems and hybrid irrigation systems, bore well pumps etc.; and rainwater harvesting systems, though revenues from information technology based Engineering Services, development of software and software programmes, distribution and supply of and to generally deal in all forms of electrical power/energy are not encouraging.

As a long-term business strategy, pursuant to the amended object clause of the Company's Memorandum of Association, the management of the Company is focusing more on trading activities these days. In Engineering and Energy business segments, the Management of the Company cautiously evaluates available options for increasing the revenue going forward. As of December 31, 2022, it had a workforce of < 15 (fifteen), which may increase further as the Company's business is under expansion.

ISSUE DETAILS:
The company is coming out with a Rights Issue (RI) of 49860082 equity shares of Rs. 10 each at par value to mobilize Rs. 49.86 cr. The issue opens for subscription on April 27, 2023, and will close on May 09, 2023. GIESL is offering RI in the ratio of 11 for 8 to eligible stakeholders as of the record date of April 18, 2023. The full amount is to be paid along with the application for the number of shares applied. Post allotment, shares will be listed on BSE and NSE. GIESL is spending Rs. 0.50 cr. for this RI process, and from the net proceeds, it will utilize Rs. 37.02 cr. for working capital, and Rs. 12.34 cr. for general corporate purposes.

While the issue is self-managed by the company itself, Hexaxis Advisors Ltd. is the advisor and Bigshare Services Pvt. Ltd. is the registrar of the issue.

Post RI, GIESL's current paid-up equity capital of Rs. 36.26 cr. will stand enhanced to Rs. 86.12 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 86.12 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, GIESL has for the last three fiscals, reported a turnover/net profit - (loss) of Rs. 0.12 cr. / Rs. - (0.04) cr. (FY20), Rs. 0.20 cr. / Rs. - (2.52) cr. (FY21), and Rs. 0.11 cr. / Rs. 0.01 cr. (FY22).

For 9M of FY23 ended on December 31, 2022, it earned a net profit of Rs. 1.45 cr. on a turnover of Rs. 465.39 cr. It still has some carried forward losses (Rs. 3.17 cr.), and debt of Rs. 1.03 cr. as of December 31, 2022.

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: 533048 (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 20.49 on April 17, 2023, and opened on an ex-right basis at Rs. 13.70 on April 18, 2023. Since then, it has marked a high/low of Rs. 17.26 / Rs. 13.70. The scrip last closed at Rs. 16.93 as of April 21, 2023, and for the last 52 weeks, it has posted a high/low of Rs. 17.77/ Rs. 3.58.

The promoters' holding has increased to 40.89% as of March 31, 2023, against 39.78% as of September 30, 2022. The counter is well-operated above the par value to lure investors.

Conclusion / Investment Strategy

Though this RI is at par, its negative NAV as of 31.12.22 and more than doubled paid-up equity capital post issue are the primary concerns. 9M of FY23 performance may not sustain going forward. There is no harm in skipping this issue which can be termed a “High Risk – Low Return” bet.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on April 24, 2023

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 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 ).

More GI Engineering Solutions Limited RI Views / Analysis / Recommendations ...

GI Engineering Solutions Limited Review by Dilip Davda

The GI Engineering Solutions 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 GI Engineering Solutions Rights Issue 2023 worth investing. The GI Engineering Solutions Rights Issue 2023 Note sets the Rights Issue expectations in systematic way which tells you if GI Engineering Solutions Rights Issue 2023 good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in GI Engineering Solutions Rights Issue 2023 by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.

GI Engg RI review (Avoid)

Conclusion / Investment Strategy

Review Author

Read more about GI Engineering Solutions Rights Issue 2023