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A-1 Acid BSE SME IPO review (Avoid)

Review By Dilip Davda on Sep 19, 2018

•    Company is engaged mainly in trading activities.
•    It also provides transportation services.
•    Its financial data showing inconsistency.
•    Issue is priced aggressively.

ABOUT COMPANY:
A-1 Acid Ltd. (A-1) is engaged in the business of trading of high quality industrial acid and Chemicals. It offers a wide range of chemical products which finds variety of applications in the industrial sector like chemical, textile, steel, aluminium, pesticides, fertilizers, intermediates, defence, metals and petro refineries. The company also provides transportation facilities to customers through owned fleet of tankers.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its working capital and general corpus fund needs, A-1 is coming out with a maiden IPO of 3000000 equity shares of Rs. 10 each with a fixed price of Rs. 60 per share to mobilize Rs. 18 cr. Issue opens for subscription on 25.09.18 and will close on 01.10.18. Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue is solely lead managed by Guiness Corporate Advisors Pvt. Ltd. while Cameo Corporate Services Ltd. is the registrar to the issue. Issue constitutes 30% of the post issue paid up capital of the company. Its entire equity is issued at par. It has also issued bonus shares in the ratio of 6 for 1 in December 2017. Average cost of acquisition of shares by the promoters is Rs. 0.70 per share. Post issue, its current paid up equity capital of Rs. 7.00 cr. will stand enhanced to Rs. 10.00 cr.  

FINANCIAL PERFORMANCE:
On performance front, for last four fiscals, A-1 has posted turnover/net profits of Rs. 97.01 cr. / Rs. 0.13 cr. (FY15), Rs. 85.39 cr. / Rs. 0.92 cr. (FY16), Rs. 105.80 cr. / Rs. 3.00 cr. (FY17) and Rs. 96.17 cr. / Rs. 2.48 cr. (FY18). With inconsistent top lines, it has surprisingly posted bumper profits for FY17 on higher top line of last four fiscals. Issue is priced at a P/BV of 3.05 on the basis of its NAV of Rs. 19.69 as on 31.03.18 and at a P/BV of 1.87 on the basis of post issue NAV of Rs. 32.08. For last three fiscals, it has posted an average EPS of Rs. 3.42 and an average RoNW of 19.69%. If we consider FY18 earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of 24 plus. Thus issue is priced very aggressively.

COMPARE WITH LISTED PEERS:
As per offer documents, It has not listed peers to compare with.

MERCHANT BANKER TRACK RECORD:
On merchant banker’s front, this is 27th mandate from its stable in last three fiscals. Out of last 10 listings 1 open at discount and the rest with a premium ranging from 0.14% to 28.72%.


Conclusion / Investment Strategy

Issue is priced very aggressively discounting all near term positives. Inconsistent financial record of the company raises concern for future working. There is no harm in giving this issue a miss.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Sep 19, 2018

Review Author

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. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the past, SME IPOs drew the attention of investors across the board. 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 own risk. The above information is based on information available as on date coupled with market perceptions. The Author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

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.

Email: dilip_davda@rediffmail.com

A1 Acid IPO FAQs

  1. 1. Why A1 Acid IPO?

    The initial public offer (IPO) of A-1 Acid Limited offers an early investment opportunity in A-1 Acid Limited. A stock market investor can buy A1 Acid IPO shares by applying in IPO before A-1 Acid Limited shares get listed at the stock exchanges. An investor could invest in A1 Acid IPO for short term listing gain or a long term.

  2. 2. How is A1 Acid IPO?

    Read the A1 Acid IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. A1 Acid IPO what should investors do?

    A1 Acid IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the A1 Acid IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  4. 4. Is A1 Acid IPO good?

    Our recommendation for A1 Acid IPO is to avoid.

  5. 5. Is A1 Acid IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the A1 Acid IPO.

  6. 6. When will A1 Acid IPO allotment status?

    The A1 Acid IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit A1 Acid IPO allotment status to check.

  7. 7. When will A1 Acid IPO list?

    The A1 Acid IPO will list on Wednesday, October 10, 2018, at BSE SME.