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Affordable Robotic BSE SME IPO review (May apply)

Review By Dilip Davda on May 18, 2018

Affordable Robotic & Automation Ltd. (ARAL) is in the business of providing turnkey automation solution to automotive, semi-automotive and manufacturing industries. ARAL programs and automates the functions of machines used in manufacturing process of automobile industry. Its assembly unit is equipped with requisite software, technology, machinery, spares store and other basic amenities  resulting in fully integrated unit. The company is also in the business of assembling and installing automatic multilevel car parking system having executed few orders from Mumbai and Pune. It recently set up a new line of business called Secondary Packaging to cater FMCG industries for automation in container packaging of final packed products.  

To part finance purchase of new plant and machinery, repayment of certain long term borrowings and working capital fund needs, ARAL is coming ou with a maiden IPO of 2681600 equity shares of Rs. 10 each via book building route with a price band of Rs. 83-85 to mobilize Rs. 22.26 cr. to Rs. 22.79 crore (based on lower and upper price bands). Issue opens for subscription on 24.05.18 and will close on 28.05.18. Minimum application is to be made for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue is solely lead managed by Pantomath Capital Advisor Pvt. Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue. Issue constitutes 26.33% of post issue paid up capital of the company. Having issued initial equity at par, it raised further equity at a price of Rs. 75 per share in February 18 and April 18. It has also issued bonus shares in the ratio of 4 for 1 in February 2016 and 4 for 1 in October 2017. Average cost of acquisition of shares by the promoters is Rs. 0.40 per share. Post issue, its current paid up equity capital of Rs. 7.50 cr. will stand enhanced to Rs. 10.18 cr.

On performance front, for last four fiscals, on standalone basis ARAL has posted turnover/net profits of Rs. 24.23 cr. / Rs. 0.81cr. (FY14), Rs. 25.95 cr. / Rs. 0.14 cr. (FY15), Rs. 47.09 cr. / Rs. 1.22 cr. (FY16) and Rs. 40.39 cr. / Rs. 3.96 cr. (FY17). For first nine months ended on 31.12.17 of FY18 it has earned net profit of Rs. 4.07 cr. on a turnover of Rs. 46.69 cr. After inconsistency in bottom lines for FY14 to FY16 it has marked surprised robust growth for FY17 and first three quarters of FY18. Sustainability of the same raises concern as for FY16 despite record high turnover till then it marked lower net compared to FY17. First nine months overshoot entire FY17 earnings. Thus miss-match of top and bottom lines are evident from the performance so far. As per offer documents on consolidated basis it has recorded turnover of Rs. 41.56 cr. with a net profit of Rs. 3.72 crore for FY17 and for nine months of FY18 it has earned net profit of Rs. 3.76 cr. on a turnover of Rs. 46.75 cr. Thus on consolidated basis it has posted lower net for FY18 3Qs compared to on standalone basis. On standalone basis for last three fiscals it has posted an average EPS of Rs. 3.85 and an average RoNW of 43.89% (with super profits for FY17). Issue is priced at a P/BV of 4.85 on the basis of NAV of Rs. 17.54 (standalone) and at a P/BV of 5.10 on the basis of its NAV of Rs. 16.67 (as on 31.12.17). If we annualize latest earnings (consolidated basis) and attribute it on fully diluted equity post issue, then asking price is at a P/E of around  17 plus. It has no listed peers to compare with. As on 31.12.17 its debt equity ratio is 0.79.

On merchant banker’s front, this is 63rd mandate from its stable in last three fiscals. Out of last 10 listings all opened with a premium on offer price ranging from 1.59% to 40% on the day of listing.


Conclusion / Investment Strategy

Although superb profits in FY17 and 9 months of FY18 raises concern, being first mover in the segment, this company might create fancy going forward. Investors may consider moderate investment for long term.

Review By Dilip Davda on May 18, 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

Affordable Robotic Automation IPO FAQs

  1. 1. Why Affordable Robotic Automation IPO?

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

  2. 2. How is Affordable Robotic Automation IPO?

    Read the Affordable Robotic Automation IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Affordable Robotic Automation IPO what should investors do?

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

  4. 4. Is Affordable Robotic Automation IPO good?

    Our recommendation for Affordable Robotic Automation IPO is to subscribe for long term.

  5. 5. Is Affordable Robotic Automation IPO worth Investing?

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

  6. 6. When will Affordable Robotic Automation IPO allotment status?

    The Affordable Robotic Automation IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit Affordable Robotic Automation IPO allotment status to check.

  7. 7. When will Affordable Robotic Automation IPO list?

    The Affordable Robotic Automation IPO will list on Monday, June 4, 2018, at BSE SME.