Airo Lam NSE SME IPO review (May apply)

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Review By Dilip Davda on Sep 18, 2017

Airo Lam Ltd. (ALL) is engaged in manufacturing of Hi Pressure decorative laminates. With its wide range of designs, it is competing with dominant players. Its plant is located at Himmatnagar, Sabarkantha, Gujarat. ALL’s distribution network includes more than 70 distributors across 20 states and 3 stock points at Mumbai, Kolkata and Bengaluru. It also exports its products to countries like UAE, Syria, Kuwait, Bangladesh, Dubai, Singapore, Iran etc. ALL’s products are sold under “Airo”, “iLAM”, “Clasico” and “iLITE”.

To part finance its working capital and general corpus fund needs, ALL is coming out with a maiden IPO of 4000000 equity share of Rs. 10 each via book building route with a price band of Rs. 36 – Rs. 38 per share to mobilize Rs. 14.40 cr. to Rs. 15.20 cr. (based on lower and upper price bands). Issue opens for subscription on 25.09.17 and will close on 27.09.17. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge.

Issue is solely lead managed by Pantomath Capital Advisors Pvt. Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue. Issue constitutes 26.67% of fully diluted post issue paid up equity capital of the company. Having issued initial equity at par between October 2007 and August 2008, it issued further equity at a price of Rs. 50 per share from November 2008 to February 2009 and has also issued bonus shares in the ratio of 1 for 1 in August 2017. Post issue its current paid up equity capital of Rs. 11.00 crore will stand enhanced to Rs. 15.00 crore.

On performance front, ALLL has posted turnover/net profits of Rs. 64.17 cr. / Rs. 1.48 cr. (FY14), Rs. 67.23 cr. / Rs. 1.60 cr. (FY15), Rs.64.06 cr. / Rs. 1.67 cr. (FY16) and Rs. 71.47 cr. / Rs. 1.89 cr. (FY17). It suffered a setback in top line for FY16 but maintained growth in bottom lines. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of around 22 plus. It’s trade receivables has gone up from Rs. 30.47 crore in FY16 to Rs. 36.60 crore in FY17 that raises concern. For last three fiscals, ALL has posted an average EPS of Rs. 1.61 on a paid up equity capital of Rs. 5.50 crore with an average RoNW of 11.13%. Issue is priced at a P/BV of 2.4. Thus issue appears fully priced.

On merchant banker’s front, this is the 49th mandate from Pantomath in last three years. Out of last 10 recent listings, 1 opened at discount, 1 at par and the rest with 1 to 18% premium on IPO price.

Conclusion: Considering fully priced issue, risk savy cash surplus investors may consider it for long term.

Conclusion / Investment Strategy

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 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

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