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Review By Dilip Davda on March 16, 2018
Continental Seeds & Chemicals Ltd. (CSCL) is engaged in the business of developing, processing, grading and supplying of all kind of agricultural foundation and certified seeds and trading of Mentha Oil. Company is engaged in the whole process of processing in varieties of seeds, foundation seed and processing of the same into certified seeds.Seed processing is a vital part of the seed production needed to move the improved genetic materials of the plant breeder into commercial channels for feeding the rapidly expanding world population. The farmer must get the quality seed that is free from all undesired materials because farmer’s entire crop depends on it. Seed can seldom be planted in the condition in which it comes from the growers. In fact, many seed lots containweed or crop seed or inert material that make them unfit for sale without processing. Crop seed also frequently have stems, awns, clusters or other structures, which prevent from flowing through the drill freely. CSCL also obtains seed certification certificate from Uttarakhand State Seed and Organic Production Certification Agency from time to time for its products.
To part finance its working capital and general corpus fund needs, CSCL is coming out with a maiden IPO of 1620000 equity shares of Rs. 10 each with a fixed price of Rs.26 per share to mobilize Rs. 4.21 crore. Issue opens for subscription on 21.03.18 and will close on 23.03.18. Minimum application is to be made for 4000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Issue is solely lead managed by Navigant Corporate Advisors Ltd. and MAS Services Ltd. is the registrar to the issue. Issue constitutes 26.99% of the post issue paid up capital of the company. Average cost of acquisition of shares by the promoters is Rs. 2.86 per share. Since inception till 2005 it issued entire equity at par. In March 2012 it raised fresh equity at a price of Rs. 100 per share. It has also issued bonus shares in the ratio of 5 for 2 in June 2017. Post issue, its current paid up equity capital of Rs. 4.38 cr. will stand enhanced to Rs. 6.00 cr.
On performance front, CSCL has posted turnover/net profits of Rs. 54.93 cr. / Rs. 0.22 cr. (FY14), Rs. 57.90 cr. / Rs. 0.27 cr. (FY15), Rs. 58.44 cr. / Rs. 0.16 cr. (FY16) and Rs. 58.24 cr. / Rs. 0.49 cr. (FY17). Thus while its top line has almost remained static bottmline has witnessed inconsistency. For first nine month of the current fiscal, it has earned net profit of Rs. 0.66 cr. on a turnover of Rs. 57.65 cr. which is a bit surprising. For last three fiscals it has posted an average EPS of Rs. 0.91 and an average RoNW of 6.25%. Issue is priced at a P/BV of 1.80 based on its NAV of Rs. 14.44 as on 31.12.17 and at a P/BV of Rs. 1.49 on the basis of its post issue NAV of Rs. 17.46. If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 17 against industry average of around 16. Thus issue is fully priced. It has shown Mangalam Seeds and Camson Seeds as its listed peers and are trading at a P/E of around 38 and 14 respectively (as on 16.03.18).
On merchant banker’s front, this is the 10th mandate from its stable in the past three years. Out of last 9 listings, 3 opened at a discount to offer price, 1 at par and the rest 5 with a premium ranging from 5% to 20%.
Static performance and full pricing makes this issue a risky bet. Cash surplus risk savvy investors may consider it for long term.
Review By Dilip Davda on March 16, 2018
DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. My reviews do not cover GMP market and operators game plans. Readers must consult a qualified financial advisor before making any actual investment decisions, based the on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the recent past, SME IPOs drew the attention of investors across the board and lead to seer madness. However, as SME issues have entry barriers and continued low preference from the broking community, any reader taking decisions based on any information published here does so entirely at their own risk. The above information is based on information available as of date coupled with market perceptions. The Author has no plans to invest in this offer.
About Dilip Davda
Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.
Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.
(Dilip Davda -SEBI registered Research Analyst-Mumbai,
Registration no. INH000003127 (Perpetual)
Email id: dilip_davda@rediffmail.com ).
The initial public offer (IPO) of Continental Seeds and Chemicals Ltd offers an early investment opportunity in Continental Seeds and Chemicals Ltd. A stock market investor can buy Continental Seeds and Chemicals Ltd IPO shares by applying in IPO before Continental Seeds and Chemicals Ltd shares get listed at the stock exchanges. An investor could invest in Continental Seeds and Chemicals Ltd IPO for short term listing gain or a long term.
Read the Continental Seeds and Chemicals Ltd IPO recommendations by the leading analyst and leading stock brokers.
Continental Seeds and Chemicals Ltd IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Continental Seeds and Chemicals Ltd IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.
Our recommendation for Continental Seeds and Chemicals Ltd IPO is to subscribe for long term.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Continental Seeds and Chemicals Ltd IPO.
The Continental Seeds and Chemicals Ltd IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit Continental Seeds and Chemicals Ltd IPO allotment status to check.
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