Chittorgarh.com Logo
Loading...

Adishakti Loha BSE SME IPO review (Avoid)

Review By Dilip Davda on Sep 28, 2021

•    ALIL is engaged in the trading of Iron and Steel.
•    It has posted lacklustre financial data so far.
•    The company operates in a highly competitive and fragmented segment.
•    The issue is exorbitantly priced.
•    Just stay away from this IPO, it is fully structured. 

ABOUT COMPANY:
Adishakti Loha & Ispat Ltd. (ALIL) is engaged in the business of trading in metals with its core focus on trading in Iron and Steel. Initially, the Company was incorporated with the object of managing, undertaking, carrying on and engaging in the business of Real Estate Development, Land Development and associated activities. The Company altered the main object clause of its Memorandum of Association vide shareholder's resolution dated June 10, 2019, to enable it to pursue the business of trading in metals. Being a trading company, it does not owe any plant, machinery. As of the date of filing of this offer document, the company had just 4 employees including key management personnel. 

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for incremental working capital (Rs. 1.69 cr.) and general corporate purpose (Rs. 0.08 cr.), ALIL is coming out with a maiden IPO of 1820000 equity shares of Rs. 10 each at a fixed price of Rs. 11 per share to mobilize Rs. 2.00 cr. The issue opens for subscription on September 30, 2021, and will close on October 05, 2021. Minimum application is to be made for 10000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 39.93% of the post issue paid-up capital of the company. ALIL will spend around Rs. 0.23 cr. for this IPO process. This is indicative of the issue is fully structured with a required subscription. 

The issue is solely lead managed by Turnaround Corporate Advisors Pvt. Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. NNM Securities Pvt. Ltd. is the market maker for this issue. 

After issuing initial equity at par, the company issued the right shares at Rs. 11 per share in January 2020. The average cost of acquisition of shares by the promoter is Rs. 10.995 per share. 

Post issue, ALIL's current paid-up equity capital of Rs. 2.74 cr. will stand enhanced to Rs. 4.56 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 5.01 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, ALIL has posted a total revenue/net profit of Rs. 0.03 cr./ Rs. 0.02 cr. (FY19), Rs. 10.95 cr. / Rs. - (0.02) cr. (FY20) and Rs. 11.38 cr. / Rs. 0.003 cr. (FY21). Thus the company has a lacklustre financial performance as it is in the highly competitive and fragmented segment. 

For the last three fiscals, ALIL has reported an average EPS of Rs. 3.83 and an average RoNW of 26.35%. The issue is priced at a P/BV of 1 based on its NAV of Rs. 10.95 as of March 31, 2021, and at a P/BV of 1 based on its post-issue NAV of Rs. 10.97.

If we attribute FY21 earnings on fully diluted post issue equity capital of the company, then the asking price is at a P/E of around 1571, making it an exorbitantly priced issue. 

COMPARISON WITH LISTED PEERS:
As per offer documents, ALIL has shown Incredible Ind. (erstwhile known as Adhunik Ind.), Kanishk Steel, Rathi Bars and Sharda Ispat as its listed peers. They are currently trading at a P/E of 31.71, 4.78, 13.32 and 9.52 (as of September 28, 2021). However, they are not truly comparable on an apple to apple basis. 

DIVIDEND POLICY:
The company has not paid any dividends since incorporation. It will adopt a prudent dividend policy post listing based on its financial performance and future prospects. 

MERCHANT BANKER'S TRACK RECORD:
This is the 2nd mandate from Turnaround since July 2018. The only listing of Avon Mold so far has opened with a premium of 0.20% on the day of listing and currently has no trades at all. Thus it has a poor track record.


Conclusion / Investment Strategy

The company is in a highly competitive and fragmented segment of trading in Iron and Steel. It has posted poor financial performance. Based on FY21 earnings, the issue is exorbitantly priced. The Lead Manager has a poor track record. Just stay away from this fully structured issue.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Sep 28, 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

Adishakti Loha and Ispat IPO FAQs

  1. 1. Why Adishakti Loha and Ispat IPO?

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

  2. 2. How is Adishakti Loha and Ispat IPO?

    Read the Adishakti Loha and Ispat IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Adishakti Loha and Ispat IPO what should investors do?

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

  4. 4. Is Adishakti Loha and Ispat IPO good?

    Our recommendation for Adishakti Loha and Ispat IPO is to avoid.

  5. 5. Is Adishakti Loha and Ispat IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Adishakti Loha and Ispat IPO.

  6. 6. When will Adishakti Loha and Ispat IPO allotment status?

    The Adishakti Loha and Ispat IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit Adishakti Loha and Ispat IPO allotment status to check.

  7. 7. When will Adishakti Loha and Ispat IPO list?

    The Adishakti Loha and Ispat IPO will list on Wednesday, October 13, 2021, at BSE SME.

Comments

Add a public comment...