Ushanti Colour Chem Ltd. (UCCL) is in the business of manufacturing and trading of various colours of dyestuffs. Having received permission for manufacturing of CPC Blue Crude dyestuff and witnessing its growing demand, UCCL ventured into it.
Business
Company’s product portfolio includes Synthetic Organic Dyes, Copper Phthalocyanine, Blue cued. These products caters to the requirements of textile, garment, cotton, leather, nylon, paper, wool, ink, wood, plastic and pain industries. UCCL mainly focuses on “Turquoise Blue” dyestuffs and pigments.
In the process, company recovers Ammonium Carbonate that is being reused in the plant as well as sold to Soda Ash industry. UCCL has domestic share of 46% and exports of 54% of its total sales. Company is exporting its products to over 16 countries that includes UK, US, Argentina, China, Korea etc.
Office
To part finance setting up of dyestuff pigment and intermediates manufacturing facility at GIDC – Bharuch, repayment/prepayment of certain secured borrowings and general corpus fund needs, UCCL is coming out with a maiden IPO of 1926000 equity shares of Rs. 10 each at a fixed price of Rs. 60 per share to mobilize Rs. 11.56 cr. Issue opens for subscription on 23.07.18 and will close on 25.07.18.
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 is solely lead managed by Pantomath Capital Advisors Pvt. Ltd.
Bigshare Services Pvt. Ltd. is the registrar to the issue. Issue constitutes 26.38% of the post issue paid up capital of the company.
Having raised initial equity at par, it raised further equity in the price range of Rs. 160 and Rs. 500 per share and has also issued bonus shares in the ratio of 3 for 2 in February 2007 and 10 for 1 in March 2018.
Average cost of acquisition of shares by the promoters is Rs. 1.04 per share. Post issue, UCCL’s current paid up equity capital of Rs. 5.38 cr. will stand enhanced to Rs. 7.30 cr.
Performance
On performance front, for last five fiscals, UCCL has posted turnover/net profits of Rs. 35.42 cr. / Rs. 2.12 cr. (FY14), Rs. 29.71 cr. / Rs. 0.25 cr. (FY15), Rs. 25.11 cr. / Rs. 0.26 cr. (FY16), Rs. 29.62 cr. / Rs. 1.28 cr. (FY17) and Rs. 36.75 cr. 2.39 cr. (FY18).
It suffered set back in top and bottom lines for FY15 and FY16 and thereafter has marked steady growth in both.
For last three fiscals, it has posted an average EPS of Rs. 3.09 and an average RoNW of 21.29%. Issue is priced at a P/BV of 3.71 on the basis of its NAV of Rs. 16.18 as on 31.03.18 and at a P/BV of 2.16 on the basis of post issue NAV of Rs. 27.74.
If we attribute FY18 on post issue equity then asking price is at a P/E of around 18 against industry average of 46. As per offer documents, it has shown Meghmani Org., Yash Chemex and Mahickra Chemicals as its listed peers that are currently trading at a P/E of around 9, 61 and 229.
Although listed peers are not strictly comparable with the company, issue appears reasonably priced. Company is clearing debt of Rs. 5.80 crore that will bring sizeable savings in finance cost for the company going forward.
On merchant banker’s front, this is 80th mandate from its stable in last four fiscals. Out of last 10 listings, 1 opened at par and the rest with marginal premiums to 10% premium on the day of listing.
Conclusion / Investment Strategy
Considering reasonable pricing and expansion plans and reduction in debts, investment for medium to long term may be considered.
