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Ashapuri Gold BSE SME IPO review (Avoid)

Review By Dilip Davda on Mar 11, 2019

•    The company has just one showroom for its core business.
•    It is entering into Readymade garment JV, a non-related business.
•    Financial performance is non-encouraging.
•    The issue is priced exorbitantly and hence not worth considering an investment.

ABOUT COMPANY:
Ashapuri Gold Ornament Ltd. (AGOL) is engaged in the business of wholesale trading of Jewellery. The Jewelries are manufactured on Job work basis at Ahmedabad and Rajkot. It is well known and trusted wholesaler of gold jewellery supplier, having a showroom of 2945 sq. feet on prime location of C.G. Road, Ahmedabad, the newly developed main market for buying Gold and Diamond Jewellery. The design of products is done either in the house or by third parties and also gets the Jewellery manufactured on a job work basis. Since the system of hallmarking is legally introduced, Company deals only in jewellery certified by Hallmark. AGOL deals in antique Jewellery too. In addition to the above, it is also in the Trading of Gold Jewellery. During the year 2018-19, the company had entered into the partnership with Mrs Kiran Soni and Mrs Alka Jitendra Soni, partner of M/s. Blue-Onxy Lifestyle, carrying on the business of Branded Readymade Garments having exclusive showrooms at Ahmedabad, Surendranagar, Mehsana and Godhara. AGOL is a major partner in this venture. Through this JV AGOL has a plan to open multiple chains of showrooms of Branded Readymade Garments over a period of time.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its plans for establishing jewellery manufacturing unit (Rs. 1.50 cr.), investment in partnership firm (Rs. 1.80 cr.), working capital (Rs. 18 cr.) and general corpus fund (Rs. 7.25 cr.)  needs, AGOL is coming out with a maiden IPO of 5750000 equity shares of Rs. 10 each at a fixed price of Rs.51 per share to mobilize Rs. 29.33 cr. The issue opens for subscription on 13.03.19 and will close on 18.03.19. Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME.

Issue constitutes 27% of the post issue paid up capital of the company. The issue is solely lead managed by Fedex Securities Ltd. while Bigshare Services Pvt. Ltd. is the registrar to the issue. NNM Securities Pvt. Ltd. is acting as joint underwriter and market maker for this issue. Having issued initial equity at par on incorporation, it raised further equity in the price range of Rs. 20 to Rs. 660 per share between March 2010 and January 2019 and has also issued bonus shares in the ratio of 65 for 1 in January 2019. The average cost of acquisition of shares by the promoters is Rs. 3.30, Rs. 3.61 and Rs.5.16 per share.

Post issue AGOL's current paid up equity capital of Rs. 15.54 cr. will stand enhanced to Rs. 21.29 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, AGOL has posted turnover/net profits of Rs. 55.63 cr. / Rs. 0.06 cr. (FY16), Rs. 37.29 cr. / Rs. 0.04 cr. (FY17) and Rs. 46.93 cr. / Rs. 0.07 cr. (FY18). For the first eight months ended on 30.11.18 of FY19, it has earned a net profit of Rs. 0.32 cr. on a turnover of Rs. 49.51 cr. For the last three fiscals, it has posted an average EPS of Rs. 0.04 and an average RoNW of 0.39%. The issue is priced at a P/BV of 4.95 based on its NAV of Rs. 10.30 as on 30.11.18.

If we annualize latest earnings and attribute it on fully diluted post issue equity, then asking price is at a P/E of 221 plus. the issue is priced exorbitantly. It has just one showroom of its core business and is entering in JV of readymade garments, a non-related business.

COMPARE WITH LISTED PEERS:
As per offer documents, it has shown D P Abhushan and Moksh Ornaments as its listed peers that are currently trading at a P/Es of around 13 and 4. (As on 11.03.19).

MERCHANT BANKER'S PERFORMANCE:
On merchant banker's front, his is the 6th mandate from its stable. Out of previous 5 listings, one opened at par and the rest with a premium ranging from 2% to 56% on the day of listing.


Conclusion / Investment Strategy

The issue is exorbitantly priced. It has just one showroom for its core business 9 employees. It is now planning partnership in non-related business of readymade garments. Financial data is non-encouraging. As on 31.12.18, it had a total strength of 9 employees including management. There is no harm in giving this issue a miss

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Mar 11, 2019

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

Ashapuri Gold IPO FAQs

  1. 1. Why Ashapuri Gold IPO?

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

  2. 2. How is Ashapuri Gold IPO?

    Read the Ashapuri Gold IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Ashapuri Gold IPO what should investors do?

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

  4. 4. Is Ashapuri Gold IPO good?

    Our recommendation for Ashapuri Gold IPO is to avoid.

  5. 5. Is Ashapuri Gold IPO worth Investing?

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

  6. 6. When will Ashapuri Gold IPO allotment status?

    The Ashapuri Gold IPO allotment status will be available on or around Mar 22, 2019. The allotted shares will be credited in demat account by Mar 26, 2019. Visit Ashapuri Gold IPO allotment status to check.

  7. 7. When will Ashapuri Gold IPO list?

    The Ashapuri Gold IPO will list on Wednesday, March 27, 2019, at BSE SME.