Dangee Dums Ltd. (DDL) (formerly known as Aromen Hospitality Pvt. Ltd.) converted into public limited company and changed its name from the latter. DDL is in the business of chocolates, cakes and pastries and is selling them under the brand name “Dangee Dums”.
To expand its product profile, it recently introduces ice creams, softies, candies, cookies, khari toast, artisan breads, thick shakes, savouries and beverages. With the help of its own R & D, the company keeps adding new products to its portfolio. Currently it operates with 81 outlets in Gujarat region.
Issue
To part finance repayment of existing secured loans, purchase of fixed assets, meeting general corpus fund etc., DDL is coming out with a maiden IPO of 2712000 equity shares of Rs. 10 each at a fixed price of Rs. 74 per share to mobilize Rs. 20.07 crore.
Issue opens for subscription on 20.08.18 and will close on 24.08.18.
Minimum application is to be made for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge.
Issue is solely lead managed by Monarch Networth Capital Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Issue constitutes 26.42% of the post issue paid up capital of the company.
Having issues initial equity at par, it raised further equity at a fixed rate of Rs. 10 to Rs. 74 per share between January 2016 and July 2017. Average cost of acquisition of shares by the promoters is Rs. 22.82, Rs. 23.24 and Rs. 74.00 per share. Post issue, its current paid up capital of Rs. 7.55 cr. will stand enhanced to Rs. 10.27 cr.
Performance
On performance front, on a standalone basis, DDL has posted turnover/net profits of Rs. 5.98 cr. / Rs. – (2.88 ) cr. (FY15), Rs. 11.53 cr. / Rs. – (5.13) cr. (FY16), Rs. 19.96 cr. / Rs. 0.90 cr. (FY17) and Rs. 36.58 cr. / Rs. 1.55 cr. (FY18). For last three fiscals, it has posted an average negative EPS of Rs. – (77.53) and negative RoNW. Issue is priced at a P/BV of 4.84 on the basis of its NAV of Rs. 15.30 as on 31.03.18. If we take latest earnings and attribute it to fully diluted equity post issue, then asking price is at a P/E of around 49 against industry composite of 83 P/E.
As per offer documents, it has shown Coffee Day, Jubilant Foods and Vidli Restaurant as its listed peers. Any of these peers are not strictly comparable with the model of DDL. These peers are currently trading at a P/Es of around 59, 101 and NA (as on 13.08.18). Thus issue appears fully priced.
Merchant Banker’s track record:
On merchant banker’s front, this is the 11th mandate from its stable. While last issue of Salebhai Internet stood withdrawn midway due to poor response, our of previous nine listings, 2 opened at discount, 3 at par and the rest with a premiums ranging from 1.42% to 45% on the day of listing.
Conclusion / Investment Strategy
Company’s top line has shown gradual increase with bottom line too marking some improvement. Thanks to hefty premiums kitty that is saving it from negative book value. Based on its spread across Gujarat and the product basket, outlook appears fairly promising. But being fully priced issue, risk savvy investors may consider investment at their own risk.
