Alumilite Architecturals NSE SME IPO review (May apply)

• AAL is engaged as an infrastructure facilitator.
• It has inconsistent top line but the rosy bottom line in recent fiscals.
• The sudden boost in the bottom line is raising concern as it is in a highly competitive segment.
• Tax matter cases against the company may impact severely if it goes against it.

ABOUT COMPANY:

Alumilite Architecturals Ltd. (AAL) is is engaged as an infrastructure facilitator by designing, engineering, fabrication and installation in the principle front of a building by providing a high quality infrastructure ancillary works including Architecturals and UPVC work for multistoried real estate projects, educational institute, hospitality industries, shopping complex, entertainment park, sports complex, public utility facility, SEZ projects for corporate and government, etc and to satisfy the customer and market needs, as the demand for light, low maintenance architectural products to suit the design aesthetics and user friendly was on the rise. In the course of performing its functions as an infrastructural facilitator, the Company may also be required, from time to time, to acquire parcels of land for the purpose of development, improvement, maintenance of the infrastructural project. In such cases, the parcels of land so acquired by it are, pending completion of the infrastructure projects, shown as part of the company's current assets. It offers various range of products to meet the demands of customers for more than two decades. It has completed over 62 projects so far.

ISSUE DETAILS/CAPITAL HISTORY:

To part finance its working capital (Rs. 6.18 cr.), repayment/pre-payment of unsecured loans (Rs. 4.00 cr.) and general corpus fund (Rs. 1.00 cr.) needs, AAL is coming out with a maiden IPO of 3828000 equity shares of Rs. 10 each at a fixed price of Rs. 30 per share to mobilize Rs. 11.48 cr. The issue opens for subscription on 24.06.19 and will close on 28.06.19. 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 35.03% of the post issue paid up capital of the company. AAL is spending Rs. 0.30 cr. for this issue process.

The issue is solely lead managed by Finshore Management Services Ltd. while Bigshare Services Pvt. Ltd. is the registrar to the issue. Beeline Broking Ltd. is acting as Market Maker for this issue.

AAL has issued entire equity at par so far and has also issued bonus shares in the ratio of 1 for 1 in October 2017. The average cost of acquisition of shares by the promoters is Rs. 4.80 and Rs. 5.22  per share.

Post issue AAL's current paid up equity capital of Rs. 7.10 cr. will stand enhanced to Rs. 10.93 cr.

FINANCIAL PERFORMANCE:

On the financial performance front,  for the last three fiscals, AAL has posted turnover/net profits of Rs. 20.69 cr. / Rs. 0.55 cr. (FY16), Rs. 33.47 cr. / Rs. 1.23 cr. (FY17) and Rs. 30.85 cr. / Rs. 2.83 cr. (FY18). For 9MFY19 it has earned a net profit of Rs. 2.58 cr. on a turnover of Rs. 16.27 cr.   

For the last three fiscals, it has posted an average EPS of Rs. 2.77 and an average RoNW of 16.21%. For these periods its top line grew at a CAGR of 14.44% and PAT grew at a CAGR of73.33%. Sustainability of margins raised concern as the segment is highly competitive and has no entry barriers.

The issue is priced at a P/BV of 1.39 on the basis of its NAV of Rs. 21.66 as on 31.12.18 and at a P/BV of 1.22 on the basis of post issue NAV of Rs. 24.58.

If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 10 thus issue appears reasonably priced. However, boost in its bottom line for pre-IPO year raises a concern about sustainability as it is facing high competition from the unorganized sector.

COMPARISION WITH LISTED PEERS:

As per offer documents, it has no listed peers to compare with.

MERCHANT BANKER'S TRACK RECORDS:

On merchant banker's front, this is the 12^th mandate from its stable in the last four fiscals. Out of the last 10 mandates 1 opened at par, 3 at discounts and the rest at premiums ranging from 1.63% to 20.67% on the day of listings.