Saketh Exim Ltd. (SEL) is engaged in the manufacturing and fabrication of various steel products which are meant for its application in pipe support system, HVAC system, Anti vibration system and equipments for industrial, commercial, utility and OEM installations.
Business
Product portfolio includes G.I. Nuts, various types of bolts, clamps, hangers, all types of bathroom pipes, fittings, bathroom accessories, sanitary wares etc.
For the fiscal 2017-18, Company’s revenue from manufacturing activities was 61.22% and from trading activities was 38.78%. SEL trades in textile products. Its all three manufacturing units are located at Vashi, Navi Mumbai.
Issue
To part finance its working capital and general corpus fund needs, SEL is coming out with a maiden IPO of 1368000 equity shares of Rs. 10 each at a fixed price of Rs. 69 per share to mobilize Rs. 9.44 crore.
Issue comprises of offer for sale of 245000 equity shares and fresh issue of 1123000 equity shares.
It opens for subscription on 01.08.18 and will close on 03.08.18.
Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Issue constitutes 27.23% of the post issue paid up capital of the company.
Issue is solely lead managed by Aryaman Financial Services Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue.
Having issued initial equity at par, SEL raised further equity at a price of Rs. 20.83 and Rs. 26 per share.
It has also issued bonus shares in the ratio of 1 for 2 in March 2018. Average cost of acquisition of shares by the promoters is Rs. 1.40, Rs. 4.84, Rs. 6.33 and Rs. 17.61 per share.
Post issue, SEL’s current paid up equity capital of Rs. 3.90 cr. will stand enhanced to Rs. 5.02 cr.
Financials
On financial performance front, for last four fiscals, SEL has posted turnover/net profits of Rs. 37.49 cr. / Rs. 0.40 cr. (FY15), Rs. 46.72 cr. /Rs. 0.77. Cr. (FY16), Rs. 51.40 cr. /Rs. 0.96 cr. (FY17) and Rs. 62.00 cr. /Rs. 1.07 cr. (FY18).
Thus there has been gradual growth in top and bottom lines. For last three fiscals, it has posted an average EPS of Rs. 2.87 and an average RoNW of 16.93%.
Issue is priced at a P/BV of 3.67 on the basis of its NAV of Rs. 18.78 as on 31.03.18 and at a P/BV of 2.26 on the basis of post issue NAV of Rs. 30.53.
Its debt ratio is around 2.63. If we attribute latest earnings on the post issue equity then asking price is at a P/E of around 32 against industry composite of 13.90. Thus it is priced very aggressively. As per offer documents, it has no listed peers to compare with.
On merchant banker’s front, as per offer document, this is the 36th mandate from its stable in last four fiscals.
Out of last 10 listings, 2 opened at discount, 2 around par and the rest with a premium ranging from 0.75% to 6% on the day of listing. Thus it has poor track record.
Conclusion / Investment Strategy
Although company has been reporting gradual growth in its top and bottom lines for last five fiscals, very aggressive pricing is the major concern.
There is no harm in giving this exorbitantly priced issue a miss.
