Aakash Exploration NSE SME IPO review (Avoid)

Review By Dilip Davda on Apr 13, 2018

Aakash Exploration Services Ltd. (AESL) was originally incorporated for carrying on the business of transportation hire, technical services and common carries. In 2007 it diversified into exploration business and is currently providing services for Oil and Gas Exploration with a fundamental vision of being a leader in providing services to Oil and Gas Field while achieving international standard of excellence. The company is based out of Ahmedabad, Gujarat. AESL is an ISO 9001 14001 and OHSAS 18001 certified company and also the member of International Association of Drilling Contractors. Its customer list includes ONGC, Hindustan Oil Exploration Company Limited, Cairn, Essar, OIL, etc and has expanded is operations in seven states.

To part finance its payment of CC facility, repayment of loans, working capital and general corpus fund needs,  AESL is coming out with a maiden IPO of 1800000 equity shares of Rs. 10 each at a fixed price of Rs. 56 per share to mobilize Rs. 10.08 cr. Issue opens for subscription on 17.04.18 and will close on 19.04.18. 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 Monarch Networth Capital Ltd. and Skyline Financial Services Pvt. Ltd. is the registrar to the issue. Issue constitutes 26.67% of the post issue paid up capital of the company. Having issued initial equity at par, it converted loans into equity at a price of Rs. 29 per share. Average cost of acquisition by the promoters is Rs. 20.03, Rs. 22.24 and Rs. 24.44 per share. Post issue, its current paid up equity capital of Rs. 4.95 cr. will stand enhanced to Rs. 6.75 cr.

On performance front, AESL has posted turnover/net profits of Rs. 13.90 cr. / Rs. 0.49 cr. (FY14), Rs. 23.45 cr. / Rs. 1.01 cr. (FY15), Rs. 25.63 cr. / Rs. 0.44 cr. (FY16) and Rs. 33.80 cr. / Rs. 1.10 cr. (FY17). It has shown gradual rise in top and bottom lines except FY 16 during which it earned lower profits despite higher turnover. For first nine months of FY18 it has earned net profit of Rs.0.68 cr. on a turnover of Rs. 31.26 cr.  For last three fiscals it has posted an average EPS of Rs. 2.25 and an average RoNW of 6.66%. Issue is priced at a P/BV of 1.57 on the basis of its NAV of Rs. 35.67 as on 31.12.17. If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 41 plus against industry average of 24 plus. As per offer documents it has shown Aban Offshore, Deep Industries and Selan Explo as its listed peers that are trading at a P/Es of around 35, 7 and 24 (as on 13.04.18). Thus issue is priced very aggressively.

On merchant banker’s front, this is the seventh mandate from its stable in last 7 fiscals. Out of last five listings, 1 opened at par and the rest 4 with a premium ranging from 1.4% to 45% on the day of listing. IPO of VCU Data that opened at Rs. 36.25 against offer price of Rs. 25 per share is currently trading around Rs. 14 per share (as on 04.04.18).


Conclusion / Investment Strategy

Although sector is poised for bright prospects and company has shown steady growth in its working except for FY16, its aggressive pricing is leaving nothing on table for new investors in near term. Hence there is no harm in giving this issue a miss.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Apr 13, 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

Aakash Exploration IPO FAQs

  1. 1. Why Aakash Exploration IPO?

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

  2. 2. How is Aakash Exploration IPO?

    Read the Aakash Exploration IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Aakash Exploration IPO what should investors do?

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

  4. 4. Is Aakash Exploration IPO good?

    Our recommendation for Aakash Exploration IPO is to avoid.

  5. 5. Is Aakash Exploration IPO worth Investing?

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

  6. 6. When will Aakash Exploration IPO allotment status?

    The Aakash Exploration IPO allotment status will be available on or around Apr 24, 2018. The allotted shares will be credited in demat account by Apr 26, 2018. Visit Aakash Exploration IPO allotment status to check.

  7. 7. When will Aakash Exploration IPO list?

    The Aakash Exploration IPO will list on Friday, April 27, 2018, at NSE SME.








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