Add Shop Promotions BSE SME IPO review (Avoid)

Review By Dilip Davda on Aug 14, 2018

•    Company is having third party operations.
•    FY18 performance is raising eyebrows.
•    Merchant banker has average track record.
•    Issue is priced very aggressively.
•    It’s a high risk/no yield bet.

About Company:
Add Shop Promotions Ltd. (ASPL) is currently engaged in the business of marketing and distribution of products in the categories of ayurvedic products, food supplements products, agricultural products, animal feed supplement products and personal care products under the brand name "Add Shop Promotion". It is supplying its products to retailers and wholesalers which are manufactured by select manufacturers under its brand. For selling products ASPL has entered into agreements with few select C&F’s in Karnataka, Maharashtra and Telangana.  Thus ASPL operates on third party model.

Capital History/Issue details:
To part finance its plan to set up herbal and ayurvedic processing units for manufacturing of cosmetic and non-cosmetic products, brand building and advertising, working capital and general corpus fund needs, ASPL is coming out with a maiden IPO of 2396000 equity shares of Rs. 10 each at a fixed price of Rs. 26 per share to mobilize Rs. 6.23 crore. Issue opens for subscription on 21.08.18 and will close on 30.08.18. Minimum application is to be made for 4000 shares and in multiples thereon, thereafter. Post allotment shares will be listed on BSE SME. Issue is solely lead managed by Fedex Securities Ltd. and Cameo Corporate Services Ltd. is the registrar to the issue. Issue constitutes 37.01% of the post issue paid up capital of the company. From FY14 to FY17 its paid up capital was Rs. 0.01 cr. that rose to Rs. 0.14 cr. as on 31.03.18 and is currently Rs. 4.08 cr. (as on 30.06.18). Average cost of acquisition of shares by the promoters is Rs. 10.17 per share. Having issued initial equity at par, it raised further equity in the price range of Rs. 25 and Rs. 29 between April 2018 and May 2018. It has also issued bonus shares in the ratio of 13 for 1 in March 2018, 1 for 4 in May 2018 and 1.25 for 1 in June 2018. Thus it raised its most of equity between March 18 and June 18. Post issue its current paid up equity capital of Rs. 4.08 cr. will stand enhanced to Rs. 6.47 cr.

Financial performance:
On performance front, for last three fiscals ASPL has posted turnover/net profits of Rs. 1.93 cr. / Rs. – (0.04) cr. (FY16), Rs. 4.55 cr. / Rs. 0.15 cr. (FY17) and Rs. 12.55 cr. / Rs. 0.23 cr. (FY18). For first quarter of FY19 it has earned net profit of Rs. 0.16 cr. on a turnover of Rs. 3.84 cr. While FY18 top line grew nearly 300% of FY17, bottom line grew by just 50% for the corresponding periods. As per offer documents, for last three fiscals it has posted an average EPS of Rs. 1.21 and an average RoNW of 31.51%. Issue is priced at a P/BV of 2.36 on the basis of its NAV of Rs. 11.01 as on 30.06.18 and at a P/BV of 1.58 on the basis of post issue NAV of Rs. 16.44. If we annualize FY19 Q1 earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 26 plus thus it is aggressively priced. It has no listed peers to compare with.

Merchant banker’s track record:
On merchant banker’s front, this is 4th issue from its stable in last three years. Out of previous three listings, 1 opened at par and the rest with a premium ranging from 2% to 11.1% on the day of listing. Thus, it has average track records.


Conclusion / Investment Strategy

Although company has shown progress in top and bottom lines, sudden jump in FY18 working is a bit surprising. Sustainability of the same going forward raises concern. Post issue equity jumps by nearly 647 times. Issue pricing is very aggressive. There is no harm in giving this issue a miss.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Aug 14, 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

Add-Shop Promotions IPO FAQs

  1. 1. Why Add-Shop Promotions IPO?

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

  2. 2. How is Add-Shop Promotions IPO?

    Read the Add-Shop Promotions IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Add-Shop Promotions IPO what should investors do?

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

  4. 4. Is Add-Shop Promotions IPO good?

    Our recommendation for Add-Shop Promotions IPO is to avoid.

  5. 5. Is Add-Shop Promotions IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Add-Shop Promotions IPO.

  6. 6. When will Add-Shop Promotions IPO allotment status?

    The Add-Shop Promotions IPO allotment status will be available on or around Sep 5, 2018. The allotted shares will be credited in demat account by Sep 7, 2018. Visit Add-Shop Promotions IPO allotment status to check.

  7. 7. When will Add-Shop Promotions IPO list?

    The Add-Shop Promotions IPO will list on Monday, September 10, 2018, at BSE SME.








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