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Gyscoal Alloys RI review (Avoid)

Gyscoal Alloys Limited Logo

•    GAL is in the business of trading and manufacturing iron, steel products, etc.
•    It has been reporting losses till FY22.
•    H1 of FY23 has turned the corner, but it has huge carried forward losses.
•    There is no harm in skipping this risky RI offer. 

ABOUT COMPANY:
Gyscoal Alloys Ltd. (GAL) started its business with the trading of iron and steel scraps, billets, CTD Bars, TMT Bars, and stainless steel long products. The Company acquired a steel rolling mill business at Ubkhal, Mehsana with a capacity of 6000 MT per annum from Shah Alloys Group and started manufacturing rolled products in the year 2005. The rolling mill capacity was increased by another 12000 MT per annum to take the total rolling mill capacity to 18000 MT per annum in the financial year 2005-06. In the financial year 2006-07, the Company further started its steel melting shop with a capacity of 12,000 MT per annum which was further increased to 18,000 MT per annum in the year 2008-09. 

The rolling mill capacity was increased by another 84,000 MT per annum to take the total rolling mill capacity to 1,02,000 MT per annum in the financial year 2014-15. At present, the combined average plant capacity is 1,20,000 MT per annum to manufacture different grades of stainless steel products such as austenitic, ferritic, and martensitic ranging between 200 series to 400 series.

GAL's stainless steel long products include angles, bright bars, black bars, flats, hexagonal and round corner squares (RCS), channels, sections, pata-patti, and rectangles in standard sizes at its manufacturing plant. The company also manufactures the above-said products on a job-work basis for third-party manufacturers based on their specifications of sizes and shapes. In pursuance of its objectives, the Company is committed to maintaining high standards of quality, efficient delivery schedules, and competitive prices. As of September 30, 2022, it has 107 employees on its payroll. 

ISSUE DETAILS:
GAL is coming out with a right issue (RI) of 174103116 shares of Re. 1 each at a fixed price of Rs. 2.75 per share to mobilize Rs.  47.88 cr. The company is offering RI in the ratio of 110 shares for every 100 shares held as of the record date of December 23, 2022, to all its eligible shareholders. The issue opens for subscription on January 02, 2023, and will close on January 12, 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. GAL is spending Rs. 0.60 cr. for this RI process. From the residual funds, it will utilize Rs. 17.50 cr. for the settlement of the entire outstanding loans, Rs. 19.50 cr. part repayment/prepayment of unsecured loans from promoter group company, and Rs. 10.28 cr. for general corporate purposes. 

The issue is solely lead managed by Fedex Securities Pvt. Ltd. and Purva Sharegistry (India) Pvt. Ltd. is the registrar of the issue.

Post RI, GAL's current paid-up equity capital of Rs. 15.83 cr. will stand enhanced to Rs. 33.24 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 91.40 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, GAL has (on a consolidated basis) posted a turnover/net profit (loss) of Rs. 73.48 cr. / Rs. - (13.67) cr. (FY20), Rs. 12.82 cr. / Rs. - (74.37) cr. (FY21), and Rs. 22.92 cr. / Rs. - (5.63) cr. (FY22). For FY22, it has shown exceptional income of Rs. 11.23 cr. and a deferred tax provision of Rs. 6.06 cr. 

For H1 of FY23 ended on September 30, 2022, it earned a net profit of Rs. 1.85 cr. on a turnover of Rs. 9.93 cr. Thus it has been posting losses till the FY22 end. As of September 30, 2022, its paid-up equity capital of Rs. 15.83 cr. has negative reserves of Rs. 45.43 cr. 

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the Letter of Offer. 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: 533275 (FV Re. 1).
The scrip last closed on cum-right basis at Rs. 4.11 as of December 22, 2022, and opened on an ex-right basis at Rs. 3.70 on December 23, 2022. Since then it has posted a high/low of Rs. 3.90 / Rs. 3.23. It last closed at Rs. 3.40 as of December 30, 2022. The scrip has marked the last 52 weeks' high/low of Rs. 7.10 / Rs. 1.90. The promoter's holding has come down from 51.56% (June 22 quarter) to 38.19% (September 22, quarter) and raises concern. The counter is well-operated above the RI price to lure investors. 


Conclusion / Investment Strategy

Though the company has expanded its capacities, it has not generated profits till the FY22 end and has huge carried forward losses. It has a negative NAV as of September 30, 2022. There is no harm in skipping this costly RI offer.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Jan 1, 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 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 Gyscoal Alloys Limited RI Views / Analysis / Recommendations ...

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


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