Bright Solar Ltd. (BSL) is engaged in assembling of DC/AC Solar Pumps and Solar Pump Systems under the registered brand name of “PUMPMAN”, “BRIGHT SOLAR”, and “BRIGHT SOLAR WATER PUMP”.
Business
It is also engaged in EPC contracts of Solar Photovoltaic Water pumps which include supplying, installing and commissioning of the pump system along with comprehensive maintenance contract for a specific period of 1-5 years.
In solar pump system it has wide range of products of DC Solar Pump, Solar Pump Inverter and AC Solar Pump. In addition, BSL has also been added water supply, sewerages and infra project in our service portfolio. Company is also planning to set up water treatment plant assembling unit at Patna (Bihar).
Issue
To part finance its plans for acquisition of land including stamping and registration for proposed solar PV Modules/panels manufacturing project, working capital and general corpus fund needs, BSL is coming out with a maiden IPO of 5400000 equity shares of Rs. 10 each with a fixed price of Rs. 36 per share to mobilize Rs. 19.44 cr.
Issue opens for subscription on 26.06.18 and will close on 29.06.18. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter.
Post allotment, shares will be listed on NSE SME Emerge. Issue is solely lead managed by Swastika Investmart Ltd. Alankit Assignments Ltd. is the registrar to the issue. Issue constitutes 26.47% 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. 50 to Rs. 91 in the year 2015 and 2016.
It has also issued bonus shares in the ratio of 9 for 1 in February 2018. Average cost of acquisition of shares by the promoters is Rs. 1.48 per share. Post issue, BSL’s current paid up equity capital of Rs. 15.00 cr. stand enhanced to Rs. 20.40 cr. Its current debt equity ratio is 0.12: 1
Performance
On performance front, for last four fiscals BSL has posted turnover/net profits of Rs. 28.46 cr. / Rs. 0.54 cr. (FY14), Rs. 47.84 cr. / Rs. 1.97 cr. (FY15), Rs. 15.47 cr. / Rs. 0.71 cr. (FY16) and Rs. 18.13 cr. / Rs. 1.71 cr. (FY17). For first 10 months ended on 31.01.18 of FY18, it has earned net profit of Rs. 5.35 cr. on a turnover of Rs. 28.27 cr.
Sudden jump in top line for FY 15 and fall thereafter and more surprising it rise in profits on lower top lines for FY 16 onwards and robust net profit for first ten months of FY18 raises eyebrows of one and all. For last three fiscals it has reported an average EPS of Rs. 0.97 and an average RoNW of 19.08%.
Issue is priced at a P/BV of 3.47 on the basis of its NAV of Rs. 10.36 as on 31.01.18 and at a P/BV of 2.10 on the basis of post issue NAV of Rs. 17.14.
If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 11.
As per offer document, it is showing Urja Global and Shakti Pumps as its listed peers that are currently trading at a P/E of around 0 and 29 (as on 19.06.18). Thus pricing appears reasonable based on its latest earnings, but will it sustain such robust performance going forward?
On merchant banker’s front, this is 16th mandate from its stable in last three fiscals. Out of last 10 listings, 2 opened at a discount to offer price, 8 with a premium ranging from 1.67% to 20% on the day of listing.
Conclusion / Investment Strategy
Inconsistency in its performance for last few years and superb earnings for first 10 months of FY18 raises concern. Though pricing looks reasonable, concern over sustainability of such earnings going forward raises doubt. Hence risk savvy investors may consider investment on their own risk. (Other).
