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Adeshwar Meditex BSE SME IPO review (May apply)

Review By Dilip Davda on Jun 12, 2021

•    AML is engaged in the manufacturing and marketing of surgical dressing and related products.
•    Its top line has shown almost static level for recent years.
•    Company's bottom line marked declining trends.
•    The issue is aggressively priced based on financial parameters.

ABOUT COMPANY:
Adeshwar Meditex Ltd. (AML) is engaged in the manufacturing of surgical dressings and external preparations products of Wound care & Wound management including sterile surgical wound dressing, tulle dressing, medical disposable, adhesive bandages, absorbent gauze, plaster, disinfectants, medical kits etc.

The Company is an ISO 13485:2016 certified Company. Its manufacturing facility situated at Deewan Industrial Estate, Palghar District., and it follows a state-of-the-art manufacturing process as prescribed by WHO-GMP, CE, ISO guidelines. The company's units are backed by advanced production facility and are fitted with the latest machinery and well organized and arranged sterilization facilities.

AML's manufacturing facility also has sophisticated facilities for quality testing, research & development, storage and packaging. It has an in-house R&D facility for on-site process improvement and for bettering present products offered as well as products under innovation and testing laboratory which ensures that its products are certified and any major defects in the products are identified on a real-time basis and rectified before the final dispatch. The company has registered 18 trademarks in India and caters for domestic as well as overseas markets (with around 11% export sale).

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its plans for part repayment of loans (Rs. 2.00 cr.), working capital (Rs. 5.27 cr. and general corpus fund (Rs. 2.06 cr.) needs, AML is coming out with a maiden IPO of 3900000 equity share of Rs. 10 each at a fixed price of Rs. 25 per share to mobilize Rs. 9.75 cr. The issue opens for subscription on June 15, 2021, and will close on June 18, 2021. Minimum application is to be made for 6000 shares and in multiples thereon, thereafter. The issue constitutes 27.02% of the post issue paid-up equity capital of the company. Post allotment, shares will be listed on BSE SME. AML is spending Rs.0.42 cr. for this IPO process.

The issue is solely lead managed by Aryaman Financial Services Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Aryaman Capital Markets Ltd. is the market maker for this IPO.

Having issued initial equity at par, the company raised further equity in the price range of Rs. 13 to Rs. 55 between March 2012 and January 2020. It has also issued bonus shares in the ratio of 4 for 1 in March 2012, 3 for 2 in January 2013, 3 for 8 in March 2014, 1 for 6 in December 2016 and 1 for 1 in January 2021. The average cost of acquisition of shares by the promoters is Rs. 0.71 per share.

Post issue, company's current paid-up equity capital of Rs. 10.53 cr. will stand enhanced to Rs. 14.43 cr. Based on the issue price, AML is looking for a market cap of Rs. 36.08 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, AML has posted turnover/net profit of Rs. 58.70 cr. / Rs. 2.56 cr. (FY18), Rs. 54.75 cr. / Rs. 2.25 cr. (FY19), Rs. 56.39 cr. / Rs. 2.01 cr. (FY20). For the first nine months ended on December 31, 2020, it has earned a net profit of Rs. 1.39 cr. on a turnover of Rs. 52.09 cr. Thus while its top-line inconstancy with static average, its bottom line has shown declining trends.

For the last three fiscals, the company has posted an average EPS of Rs. 2.25 and an average RoNW of 13.25%. The issue is priced at a P/BV of 1.30 based on its NAV of Rs. 19.18 as of December 31, 2020, and at a P/BV of 1.20 based on its post-issue NAV of Rs. 20.76.

If we annualize FY21 earnings and attribute it to fully diluted post issue equity, then the asking price is at a P/E of 19.53.

COMPARISON WITH LISTED PEERS:
As per offer documents, AML has shown KMS Medi, Mohini Health as its listed peers. They are currently trading at a P/E of 100 and 7.95 (as of June 11, 2021). However, they are not truly comparable on an apple to apple basis.

MERCHANT BANKER'S PERFORMANCE:
This is the 26th mandate from Aryaman Financial in the last four fiscals (including the ongoing one). Out of the last 10 listings, 2 opened at discount and the rest with premiums ranging from 0.04% to 2.16% on the day of listing.


Conclusion / Investment Strategy

Based on static financial parameters with declining trends for the bottom line, the issue appears aggressively priced and un-appealing. Cash surplus, risk savvy investors may consider investment at their own risk.

Review By Dilip Davda on Jun 12, 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

Adeshwar Meditex IPO FAQs

  1. 1. Why Adeshwar Meditex IPO?

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

  2. 2. How is Adeshwar Meditex IPO?

    Read the Adeshwar Meditex IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Adeshwar Meditex IPO what should investors do?

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

  4. 4. Is Adeshwar Meditex IPO good?

    Our recommendation for Adeshwar Meditex IPO is to subscribe for long term.

  5. 5. Is Adeshwar Meditex IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Adeshwar Meditex IPO.

  6. 6. When will Adeshwar Meditex IPO allotment status?

    The Adeshwar Meditex IPO allotment status will be available on or around Jun 23, 2021. The allotted shares will be credited in demat account by Jun 25, 2021. Visit Adeshwar Meditex IPO allotment status to check.

  7. 7. When will Adeshwar Meditex IPO list?

    The Adeshwar Meditex IPO will list on Monday, June 28, 2021, at BSE SME.