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AA Plus BSE SME IPO review (Avoid)

Review By Dilip Davda on Jul 3, 2021

•    AAPTL is primarily engaged in the trading of metal and other alloy products.
•    It has a total employee strength of 9 including management as of May 31, 2021.
•    It has posted listless financial performance so far and has no formal dividend policy.
•    The issue is exorbitantly priced.
•    Leas Manager has an average track record.  

ABOUT COMPANY:
AA Plus Tradelink Ltd. (AAPTL) is currently engaged in the business of trading products made from iron & steel, aluminium, graphite and other alloy products. It is also supplying epoxy floor coatings, industrial epoxy floor coatings, epoxy floor coating marine, PU floor coating etc. It is providing its services to corporate and other clients from the construction and manufacturing industry.

As of May 31, 2021, it has a total employee strength of 9 including management. It is operating in a highly competitive field that is fragmented. It operates from the leased office which has an agreement till January 14, 2022. Thus the company has no own property or assets.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for working capital (Rs. 4.77 cr.) and general corpus funds (Rs. 1.41 cr.) AAPTL is coming out with a maiden IPO of 3600000 equity shares of Rs. 10 each at a fixed price of Rs. 18 per share to mobilize Rs. 6.48 cr. Minimum application is to be made for 8000 shares and in multiples thereon, thereafter. The issue opens for subscription on July 08, 2021, and will close on July 13, 2021. Post allotment, shares will be listed on BSE SME. AAPTL will be spending Rs. 0.30 cr. for this IPO process. Issue constitutes 44.09% of the post issue paid-up capital of the company.

The issue is solely lead managed by Inventure Merchant Banker Services Pvt. Ltd. and Purva Sharegistry (India) Pvt. Ltd. is the registrar to the issue. Sernet Financial Services Pvt. Ltd. is the market maker for this issue.

Having issued initial equity at par, the company raised further equity at Rs. 25.00 per share between August 2016 and March 2019. It has also issued bonus shares in the ratio of 1 for 1 in March 2020. The average cost of acquisition of shares by the promoters is Rs. 12.50 and Rs. 14.67 per share.

Post issue AAPTL's current paid-up equity capital of Rs. 4.56 cr. will stand enhanced to Rs. 8.16 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 14.70 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, AAPTL has posted a turnover/net profit of Rs. 5.20 cr. / Rs. 0.10 cr. (FY19), Rs. 17.32 cr. / Rs. 0.14 cr. (FY20) and Rs. 9.51 cr. / Rs. 0.13 cr. (FY21). As per draft prospectus data, for FY18 it earned a net profit of Rs. 0.06 cr. on a turnover of Rs. 22.04 cr. Thus there is no consistency in the top and bottom lines.

For the last three fiscals, it has reported an average EPS of Rs. 0.33 and an average RoNW of 2.19%. The issue is priced at a P/BV of 1.36 based on its NAV of Rs. 13.28 as of March 31, 2021, and at a P/BV of 1.17 based on post issue NAV of Rs. 15.36. If we attribute FY21 earnings on fully diluted post issue equity capital, then the asking price is at a P/E of 112.50 thus the issue is priced exorbitantly.

COMPARISON WITH LISTED PEERS:
As per offer documents, AAPTL has shown Century Extrusions, Sacheta Metals and Sharda Ispat as its listed peers. They are currently trading at a P/E of 35.41, 17.1 and 11.25 (as of July 02, 2021). However, they are not truly comparable on an apple to apple basis.

DIVIDEND POLICY:
As per offer documents, AAPTL has no formal dividend policy. However, it will follow a prudent dividend policy post listing on the basis of its financial performance and business prospects.

MERCHANT BANKER'S TRACK RECORD:
On the merchant banker's front, this is the fourth mandate from its stable. Out of the last three listings, one opened at discount and the remaining two with a premium of 1.89% and 2.70%. Thus it has an average track record.


Conclusion / Investment Strategy

The company is engaged in the trading of metal and alloys which is highly fragmented and has stiff competition. Based on its financial track record, the issue appears exorbitantly priced. Hence there is no harm in skipping this issue.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Jul 3, 2021

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

AA Plus Tradelink IPO FAQs

  1. 1. Why AA Plus Tradelink IPO?

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

  2. 2. How is AA Plus Tradelink IPO?

    Read the AA Plus Tradelink IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. AA Plus Tradelink IPO what should investors do?

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

  4. 4. Is AA Plus Tradelink IPO good?

    Our recommendation for AA Plus Tradelink IPO is to avoid.

  5. 5. Is AA Plus Tradelink IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the AA Plus Tradelink IPO.

  6. 6. When will AA Plus Tradelink IPO allotment status?

    The AA Plus Tradelink IPO allotment status will be available on or around Jul 16, 2021. The allotted shares will be credited in demat account by Jul 19, 2021. Visit AA Plus Tradelink IPO allotment status to check.

  7. 7. When will AA Plus Tradelink IPO list?

    The AA Plus Tradelink IPO will list on Thursday, July 22, 2021, at BSE SME.