Makers Laboratories RI review (May apply)

Makers Laboratories Limited Logo

•    MLL is in the generic pharmaceutical business.
•    It skipped dividends for the last three fiscals.
•    For 3Qs of FY22 it has posted improved performance. 
•    RI is fully priced based on its financial data

Makers Laboratories Ltd. (MLL) was incorporated in July 1984 by a group of businessmen and CAs. Later on, its management was changed in April 1988 that subsequently acquired by the current management in 1997. 

It has two factories located at (a) Plot No. 29/3 Phase III, GIDC Industrial Estate, Naroda, Ahmedabad; and (b) Plot No. 30/4 Phase III, GIDC Industrial Estate, Naroda, Ahmedabad. Both these factories are opposite each other. Apart from this, MLL has office-cum-warehouse situated at Plot No. 25/4, Phase III, GIDC Industrial Estate, Naroda, Ahmedabad. The factory units and the office-cum-warehouse have been taken on a lease basis for a period of 99 years and for 10 years, respectively.

It is a growing Indian Pharmaceutical Company with a strong thrust on Generics and Branded Generics drugs and offering high-quality products at affordable prices. The company's major thrust is the marketing of Branded Generic Pharmaceutical Formulations in the Indian market. These formulations are mainly used by the dispensing doctors, nursing homes and hospitals. MLL is one of the companies in India to start a generic business in an organized manner at a time when the generic market was at its nascent stage. It gets its products manufactured from its own factory in Ahmedabad along with getting products manufactured on a P2P and loan license basis from other cGMP standard manufacturing facilities of various pharmaceutical companies situated across India.

Its products have a good presence among the Dispensing Doctors & Retail chemists and e-pharmacies across India. The Company provides cost-effective medicines in various therapy segments to the end-users. MLL has a product range of around 170 products in therapy segments such as Anti-Malarial, Analgesics, Anti Pyretic, Anti-Allergy, Nutritional Supplements, Dermatology, Ophthalmic, Anti Diabetic, Anti-Hypertensives etc.

The company is offering rights issue (RI) of 983396 equity shares of Rs. 10 each at a fixed price of Rs. 150 per share to mobilize Rs. 14.75 cr. MLL is offering 1 for 5 rights shares to the shareholders registered with the company on the record date of April 01, 2022. The issue opens for subscription on April 18, 2022, and will close on April 27, 2022. Post allotment, shares will be listed on BSE. The company is spending Rs. 0.40 cr. for this RI. From the net proceeds, MLL will utilize Rs. 11.22 cr. for up-gradation of existing manufacturing units and Rs. 3.13 cr. for general corporate purposes. This is perhaps the first shortest subscription period duration rights issue. 

The issue is solely lead managed by Arihant Capital Markets Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue. 

Post RI, MLL's current paid-up equity capital of Rs. 4.92 cr. will stand enhanced to Rs. 5.90 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 88.51 cr. 

On the financial performance front, for the last fiscal, MLL has (on a consolidated basis) posted turnover/net profits of Rs. 69.70 cr. / Rs. 1.35 cr. (FY21). For the first nine months of FY22 ended on December 31, 2021, it has earned a net profit of Rs. 10.79 cr. on a turnover of Rs. 101.87 cr. Promoters holding stood at 58.37% since last three quarters. 

On a standalone basis, it incurred losses for FY21 and for the last three quarters it has posted small profits. 

The company paid a dividend of 10% from August 2010 to August 2019 and skipped it since then. It will adopt a prudent dividend policy in the coming years based on its financial performance and future prospects. 

The scrip last quoted on cum-right basis at Rs. 198.20 on March 29, 2022, and opened on the ex-rights basis at Rs. 188.00 on March 30, 2022. Since then it has marked high/low of Rs. 199.00 / Rs. 160.10. It last closed at Rs. 166.90 as of April 13, 2022. At this closing price, its market cap on fully diluted post RI equity comes to Rs. 98.48 cr. The scrip has marked the last 52 weeks high/low of Rs. 263.63 / Rs. 160.10. 

Conclusion / Investment Strategy

The company has suffered a setback and skipped dividends since FY19. For the 3Qs of FY22, it has posted improved performance. Based on its financial data, the RI is fully priced. Investors may consider an investment with a long term perspective only.

Review By Dilip Davda on Apr 14, 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 Makers Laboratories Limited RI Views / Analysis / Recommendations ...

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