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AKG Exim NSE SME IPO review (May apply)

Review By Dilip Davda on September 3, 2018

•    AKG is in the trading business for import and export of commodities.
•    Counterpart is a group company having similar interest.
•     Sudden jump in bottom line for FY18 is a bit surprising.
•    Issue is priced at a P/E of 20 plus.
•    LM has average track record.

AKG Exim Ltd. (AKG) is a diversified merchant trading company in vast range of products & commodities with quality management system confirming to ISO 9001:2008. Company is a merchandiser, distributor of variety of products including Non Basmati Rice, Metal Scrap, Aluminium scrap, Iron Scrap, Spices and Dry Fruits, etc. With a steady expansion in the market, company is consistently aiming to achieve its mission of providing world class customer services. Metal Scrap etc. is being imported from Singapore and sold in Indian Domestic markets; and Non Basmati Rice is being purchased in the Indian domestic Market and Exported in Signapore. 100% of Non Basmati Rice is being exported by the Company.

To part finance its working capital and general corpus fund needs, AKG is coming out with a maiden IPO of 1780000 equity shares of Rs. 10 each at a fixed price of Rs. 31 per share. Company mulls mobilizing Rs. 5.52 cr. with this issue. Issue opens for subscription on 10.09.18 and will close on 14.09.18. Minimum application is to be made for 4000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Issue constitutes 36.89% of the post issue paid up capital of the company. Issue is solely lead managed by Navigant Corporate Advisors Ltd. and Mas Services Ltd. is the registrar to the issue. Having issued initial equity and a token rights issue in March 2017 at par, it raised further equity at a price of Rs. 100 per share between March 2011 and January 2013. It has also issued bonus shares in the ratio of 1 for 1 in January 2018. Average cost of acquisition of shares by the promoters is Rs. 5.13 per share. Post issue, AKG’s current paid up equity capital of Rs. 4.84 cr. will stand enhanced to Rs. 6.62 cr.

On performance front, for last four fiscals, AKG has posted turnover/net profits of Rs. 74.82 cr. / Rs. 0.41 cr. (FY15), Rs. 98.59 cr. / Rs. 0.41 cr. (FY16), Rs. 105.55 cr. / Rs. 0.49 cr. (FY17) and Rs. 112.35 cr. / Rs.  1.02 cr. (FY18).  Sudden jump in bottom line for FY18 is a bit surprising. For last three fiscals, company has posted an average EPS of Rs. 2.70 and an average RoNW of 6.34%. Issue is priced at a P/BV of 0.76 on the basis of its NAV of Rs. 40.92 as on 31.03.18 and at a P/BV of 1.19 on the basis of post issue NAV of Rs. 26.04. If we consider FY18 earnings and attribute it on fully diluted post issue equity, then asking price is at a P/E of around 20 plus, against industry average of 164 (??).

As per offer documents, it has shown Agro Tech Foods and AuSom Enterprise as its listed peers that are currently trading at a P/Es of around 50 and 5 (as on 03.09.18). However, they are not strictly comparable. Recent poor listing of Sarveshwar Foods SME IPO dented general sentiment for agro base companies.

On merchant banker’s front, this is the 15th mandate from its stable in last three years. Out of last 10 listings, 3 opened at discount, 1 at par and the rest with a premium ranging from 5% to 20% on the day of listings.

Conclusion / Investment Strategy

Issue is fully priced. Sudden jump in FY18 earnings is a bit surprising. LM has average track record. AKG’s export/ import business is with a group company having similar business that raises concern. Rupee/Dollar parity may impact it’s working.  Cash surplus investors may consider investment  at their own risk.

Review By Dilip Davda on September 3, 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. My reviews do not cover GMP market and operators game plans. Readers must consult a qualified financial advisor before making any actual investment decisions, based the on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the recent past, SME IPOs drew the attention of investors across the board and lead to seer madness. 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 their own risk. The above information is based on information available as of date coupled with market perceptions. The Author has no plans to invest in this offer.

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.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: ).

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  4. 4. Is Akg Exim IPO good?

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

  6. 6. When will Akg Exim IPO allotment status?

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

  7. 7. When will Akg Exim IPO list?

    The Akg Exim IPO will list on Tuesday, September 25, 2018, at NSE SME.