Tasty Dairy BSE SME IPO Review (May apply)

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Review By Dilip Davda on February 4, 2018

Tasty Dairy Specialities Ltd. (TDSL) is currently involved in processing milk, along with bulk milk procurement and handling during season time which primarily caters to bulk and marquee institutional customers. Company is further involved in value added milk products like Skimmed Milk Powder, Butter, Ghee, Dairy Whitener, Concentrated Milk etc. This is providing the company a firm ground to enter into retail segment. Currently, TDSL is situated in Uttar Pradesh, which is one of the largest milk producers State in India. Its manufacturing unit at D-3, UPSIDC Industrial Area, Jainpur, Kanpur Dehat, Uttar Pradesh falls in the richest milk belt of U.P. The Company with the existing plant and machinery is capable of handling approximately 5,00,000 litres of raw milk which comprises of 1,60,000 litres of milk packaging, 20,000 litres of buttermilk packaging, 2,20,000 Litres for making Skimmed Milk Powder and Ghee and 2,00,000 litres of bulk milk processing. These facilities are not only in close proximity to its milk procurement region but also to target market. Over the two decades, the Company invested consistently in proactive capacity creation, stretching its gearing to a peak. Company’s products are sold under the brand names like SHIKHAR, UJJWAL, Verifresh and CIMA.

To part finance its working capital and general corpus fund needs, TDSL is coming out with a maiden IPO of 5430000 equity shares of Rs. 10 each at a fixed price of Rs. 45 per share to mobilize Rs. 24.44 crore. Issue opens for subscription on 07.02.18 and will close on 12.02.18. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue is solely lead managed by Mark Corporate Advisors Pvt. Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Issue constitutes 26.58% of the post issue paid up capital of the company. Average cost of acquisitions of shares by the promoters is Rs. 0.067 per share. Its entire initial equity is issued at par. It has also issued bonus shares in the ratio of 14 for 1 in February 2007, 1 for 1 in March 2010, 2 for 1 in November 2012 and 2 for 3 in September 2017. Post issue, its current paid up equity capital of Rs. 15.00 cr. will stand enhanced to Rs. 20.43 cr.

On performance front, TDSL has posted turnover/net profits of Rs. 251.90 cr. / Rs. 5.43 cr. (FY14), Rs. 307.95 cr. / Rs. 4.48 cr. (FY15), Rs. 334.88 cr. / Rs. 4.63 cr. (FY16) and Rs. 239.00 cr. / Rs. 4.52 cr.(FY17). Though its top line marked growth from FY 14 to FY 16, it marked declined in bottom lines. For FY17 it suffered a setback in top line as well, but surprising posted better net. For first half of the current fiscal, it has earned net profit of Rs. 2.43 cr. on a turnover of Rs.137.40 cr. For last three fiscals it has posted an average EPS of Rs. 2.51 and average RoNW of 6.56% on an equity base of Rs. 9 crore. However, company has posted an average EPS of Rs. 1.51 on post bonus equity as on 30.09.17. Issue is priced at a P/BV of 1.83 on the basis of its NAV of Rs. 24.57 as on 30.09.17 and at a P/BV of 1.5 on the basis of its post issue NAV of Rs. 30. If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 19 against listed peers trading at Kwality (16), Prabhat Dairy (76) and Hatsun Agro (96). Issue appears fully priced based on its performance parameters. Group’s three companies are also dealing in similar business.

On merchant banker’s front, this is the 2nd mandate from its stable and the only one listing took place so far i.e. Madhya Pradesh Media opened around 6% premium to offer price.

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