Guj Natural Resources RI review - (May apply)

•    The company is engaged in oil and gas segment related services.
•    It posted inconsistency in its top and bottom lines for the reported periods. 
•    Though this RI is at par, it has non-convincing financial data and higher equity base post-RI indicates its servicing issues.
•    Well-informed/cash surplus/risk seekers may park moderate funds for long term.

PREFACE:
For this RI, the offer documents were made available on BSE by late eve of December 10, 2024, though the offer document has filing date of December 06, 2024. 

ABOUT COMPANY:
Gujarat Natural Resources Ltd. (GNRL) was originally incorporated as Lesha Steels Limited‟ a Public limited company vide a certificate of incorporation dated August 23, 1991, and got its Certificate of Commencement of Business dated 24th June, 1992 issued by the Registrar of Companies, Gujarat, subsequently the Company had Change its name as "Lesha Energy Resources Limited" dated March 13, 2008 and thereafter the Company again changed its name as "Gujarat Natural Resources Limited" dated March 23, 2010 as provisions of the Companies Act, 1956 and approval granted for the same from Registrar of Companies, Gujarat.

The Company is generating significant revenue through its step-down subsidiary company i.e. "GNRL Oil & Gas Limited (formerly Heramec Limited)" engaged in upstream oil & gas sector in India, and indulge in the business of Extraction of crude petroleum and natural gas. Exploration of crude oil and natural gases, drilling of wells and refining the products encompassing oil and gas components. PSCs signed in the year 2001 for 6 small development fields in Cambay basin, Received Mining Leases during 2003 (effective date), tenure of the contract is for 25 years from the effective date, provision for extension of PSCs for mutually agreed period, commenced operations, Worked over all sick wells & kept on regular production, Acquired 95 sq.km of 3D seismic data in operating fields, Submitted partial development plans, Drilled 2 appraisal wells in Kanawara field (includes one deviated well), Carried out hydraulic fracturing & other stimulation jobs. The Company Has Drilled 7 development & exploratory-cum-development wells, Carried out hydraulic fracturing & other stimulation jobs, Hydrocarbon reserves evaluation & certification by third party.

During the year 2022-23 it completed drilling of 3 development wells in Kanawara field, Acquired latest PNL Logs for identification of by-passed zones in Allora, Dholasan, Unawa & North Kathana fields. It is currently indulging in drilling as commenced in the month of November 2023, whereas drilling of K #11 and K #15 have been completed. Drilling of K #14 is in progress. The offer document is silent on its employees' strength data.

ISSUE DETAILS:
The company is coming out with a Rights Issue (RI) of 48150987 equity shares of Rs. 10 each at par value to mobilize Rs. 48.15 cr. The RI opens for subscription on December 12, 2024, and will close on December 20, 2024. The full amount is to be paid on application for number of shares applied. The company is offering RI in the ratio of 3 for 5 to its eligible stakeholders as of the record date of December 03, 2024. Post allotment, shares will be listed on BSE. The company is spending Rs. 1.00 cr. for this RI process, and from the net proceeds, it will utilize Rs. 20.00 cr. for investment in wholly owned subsidiary, Rs. 20.00 cr. for repayment of certain borrowings, and Rs. 7.15 cr. for general corporate purposes. 

The RI is self-managed by the company itself, and Purva Sharegistry (India) Pvt. Ltd. is the registrar to the issue. 

Post-RI, company's current paid-up capital of Rs. 80.25 cr. will stand enhanced to Rs. 128.40 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 128.40 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, the company has (On a consolidated basis) posted total income/net profit/ - (loss) of Rs. 14.33 cr. / Rs. - (6.20) cr. (FY23), Rs. 27.70 cr. / Rs. - (3.88) cr. (FY24). For H1 of FY25 ended on September 30, 2024, it marked a profit of Rs. 0.42 cr. on a total income of Rs. 11.51 cr. There appears to be some window dressing for H1 o fFY25 performance as it made little profits on a declined top line. This is just an eyewash to sail through the at par RI. 

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: 513536 (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 23.95 on December 02, 2024, and opened on an ex-right basis at Rs. 17.80 on December 03, 2024. Since then, it has marked a high/low of Rs. 20.64 / Rs. 17.60. The scrip last closed at Rs. 17.74 as of December 10, 2024. For the last 52 weeks' it has posted a high/low of Rs. 24.32 / Rs. 9.93. The counter is currently under ESM: Stage 1.

The promoters' holding has been constant at 3.03% for the last two quarters ended with Sept. 30, 2024. The counter is well managed above the RI by vested interests (following low promoters holding) to lure investors.