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Arvee Laboratories NSE SME IPO Review (Avoid)

Review By Dilip Davda on Feb 6, 2018

Arvee Laboratories (India) Ltd. (ALL) that started as a trader of third party specialty chemicals is now manufacturing it. It currently operates supplier’s operations and has expanded the capacities. It mulls takeover of these facilities and is in the process of formalities. Company’s product includes Polymer Modifiers, Contrast Media Intermediates, Drug Intermediates and its plant utilization has never gone above 47% in last four fiscals.

To part finance its repayment of unsecured loans of promoters, ALL is coming out with a maiden IPO of 1460000 equity shares of Rs. 10 each at a fixed price of Rs. 61 per share to mobilize Rs. 8.91 crore. Issue opens for subscription on 09.02.18 and will close on 14.02.18. Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Issue constitutes 26.50% of post issue paid up capital of the company. Issue is solely lead managed by Sarthi Capital Advisors Pvt. Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Average cost of acquisition of shares by the promoters is Rs. 10 per share. It has raised entire equity at par so far. Post issue its current paid up equity capital of Rs. 4.05 cr. will stand enhanced to Rs. 5.51 cr.

On performance front, ALL has posted turnover/net profits of Rs. 11.84 cr. / Rs. 0.02 cr. (FY14), Rs. 13.05 cr. / Rs. -1.65 cr. (loss) (FY15), Rs. 26.92 cr. / Rs. 0.19 cr. (FY16) and Rs. 34.94 cr. / Rs. 1.55 cr. (FY17). Thus it has marked inconsistency in bottom lines for all these years. For first half of the current fiscal, it has earned net profit of Rs. 0.32 cr. on a turnover of Rs. 19.80 cr. sudden jump in bottom line for FY17 is a bit surprising. For last three fiscals it has posted an average EPS of Rs. 1.15 and average RoNW of 1.46%. Issue is priced at a P/BV of 5.88 based on its NAV of Rs. 10.36 as on 31.03.17 and at a P/BV of 2.57 on the basis of its post issue NAV of Rs. 23.77. If we annualize latest earnings and attribute it on fully diluted post issue equity then asking price is at a P/E of around 52 plus. On the basis of FY17 earnings P/E comes to around 22. Thus issue is priced aggressively. P/Es of its listed peers are Transpek (21), Thirumalai (22) and Finotex (20).  

On merchant banker’s front, this is the 29th mandate from its stable in last three years. Out of last 10 listings, 1 opened at discount, 1 at par and the rest with a premium ranging from 1% to 153% on the day of listing. 153% premium opening was marked by the only main board IPO from its stable i.e. Salasar Techno.


Conclusion / Investment Strategy

Considering aggressive pricing and average but inconsistant performance so far, one may give this issue a miss.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Feb 6, 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

Arvee Labs IPO FAQs

  1. 1. Why Arvee Labs IPO?

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

  2. 2. How is Arvee Labs IPO?

    Read the Arvee Labs IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Arvee Labs IPO what should investors do?

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

  4. 4. Is Arvee Labs IPO good?

    Our recommendation for Arvee Labs IPO is to avoid.

  5. 5. Is Arvee Labs IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Arvee Labs IPO.

  6. 6. When will Arvee Labs IPO allotment status?

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

  7. 7. When will Arvee Labs IPO list?

    The Arvee Labs IPO will list on Thursday, February 22, 2018, at NSE SME.