Review By on June 22, 2018
Ganga Forging Ltd. (GFL) is engaged in manufacturing of closed die forged products catering to both automotive and non-automotive segment. Automotive segment include manufacturing of products catering to commercial vehicle, passenger car, three wheeler, two wheeler and tractor. Non-automotive segment include electric power transmission, dairy equipment manufacturing, agricultural, gear and gear box, crank shafts, connecting road, heavy engineering industrial, hubs and flanges.
To part finance its plans to set up closed die forging manufacturing plant and general corpus fund needs, GFL is coming out with a maiden IPO of 2382000 equity shares of Rs. 10 each at a fixed price of Rs. 21 per share to mobilize Rs. 5.00 crore. Issue opens for subscription on 29.06.18 and will close on 03.07.18. Minimum application is to be made for 6000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Issue is solely lead managed by Pantomath Capital Advisors Pvt. Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue. Issue constitutes 29.97% of the post issue paid up capital of the company. Having issued initial equity at par, it raised further equity in the price range of Rs. 21 to Rs. 21.70 and has also issued bonus shares in the ratio of 1.5 to 1 (February 2003) and 9 for 1 (September 2017). It has shown wrong ratio of 9 for 1 bonus in February 2003 (page no. 74 of offer document). Average cost of acquisition of shares by the promoters is Rs. 8.46 and Rs. 9.12 per share. Post issue, GFL’s current paid up equity capital of Rs. 5.57 cr. will stand enhanced to Rs. 7.95 cr.
On performance front, for last four fiscals, GFL has posted turnover/net profits of Rs. 16.96 cr. / Rs. 0.61 cr. (FY14), Rs. 15.57 cr. / Rs. 0.47 cr. (FY15), Rs. 17.69 c.r / Rs. 0.25 cr. (FY16) and Rs. 17.79 cr. / Rs. 0.48 cr. (FY17). For first nine months ended on 31.12.17 of FY18 it has earned net profit of Rs. 0.39 cr. on a turnover of Rs. 18.18 cr. Thus it has shown inconsistency in top and bottom lines for all these years. For last three fiscals it has posted an average EPS of Rs. 1.15 and an average RoNW of 11.05%. Issue is priced at a P/BV of 1.42 based on its NAV of Rs. 14.81 as on 31.12.17 and at a P/BV of 1.26 based on post issue NAV of Rs. 16.69. If we annualize latest earnings and attribute it to fully diluted equity post issue, then asking price is at a P/E of around 32 thus issue is aggressively priced around industry average.
On merchant banker’s front, this is 76th mandate from its stable in last four fiscals and out of last 10 listings 2 opened at par and the rest with a premium ranging from 2.86% to 40% on the day of listing. (as per offer documents).
Considering Inconsistency in financial track record and aggressive pricing, there is no harm in giving this issue a miss. (Avoid)
Review By on June 22, 2018
Dilip Davda is a veteran financial journalist associated with the Indian stock market since 1978. He has been contributing to print and electronic media on capital markets, insurance, and finance since 1985.
He is widely recognized for reviewing public issues and non-convertible debentures (NCDs) in the primary market. Drawing on over three decades of market experience and close interaction with merchant bankers, his reviews focus on detailed fundamental and financial analysis of companies, with a special emphasis on SME public issues.
Dilip Davda
SEBI Registered Research Analyst – Mumbai
Registration No.: INH000003127 (Perpetual)
Email: dilip_davda@rediffmail.com
Disclaimer: The information provided herein is solely for educational and informational purposes and does not constitute an offer, solicitation, or recommendation to buy or sell any securities. Readers are advised to consult a qualified financial advisor before making any investment decisions. Investments in the securities market are subject to market risks. The author does not intend to invest in the securities discussed.
The initial public offer (IPO) of Ganga Forging Ltd. offers an early investment opportunity in Ganga Forging Ltd.. A stock market investor can buy Ganga Forging IPO shares by applying in IPO before Ganga Forging Ltd. shares get listed at the stock exchanges. An investor could invest in Ganga Forging IPO for short term listing gain or a long term.
Read the Ganga Forging IPO recommendations by the leading analyst and leading stock brokers.
Ganga Forging IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Ganga Forging IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts mentioned in the above answer to "How is Ganga Forging IPO?"
Our recommendation for Ganga Forging IPO is to avoid.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Ganga Forging IPO.
The Ganga Forging IPO allotment status will be available on or around July 6, 2018. The allotted shares will be credited in demat account by July 10, 2018. Visit Ganga Forging IPO allotment status to check.
