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Ashapuri Gold Orna FPO review (Avoid)

Review By Dilip Davda on March 2, 2021

•    The company is engaged in the manufacturing and wholesale trading of jewellery.
•    For the last three fiscals financial data shows the average performance of the company.
•    The issue is exorbitantly priced based on FY2020 full-year performance.
•    The company has changed the Lead Manager and Market Maker for this FPO.

Ashapuri Gold Ornaments Ltd. (AGOL) came with its maiden Initial Public Offer (IPO) in the month of March 2019 at a fixed price of Rs. 51 per share to mobilize Rs. 29.33 cr. The issue got a 1.16-time subscription.  At that time the Lead Manager was Fedex Securities Ltd., and the Market Maker was NNM Securities Pvt. Ltd. Now within a time frame of two years, the company is coming with Follow-on Public Offer (FPO) with the change of guards i.e. this time the Lead Manager is Mehta Integrated Finance Ltd. and the market maker is Beeline Broking Ltd. For FPO, AGOL is asking a fixed price of Rs. 81 per share to mobilize Rs. 30.02 cr. The scrip then (in 2019) got listed at discount and after moving both ways, it finally closed at par for IPO listing. For both the issues, the concerned Market Maker agreed to higher underwriting commitments.

If we consider faring of SME FPOs post listings so far like MRSS, Meera Industries, it would be a pre-cursor for staying away from such exorbitantly priced issues.

AGOL is engaged in the business of wholesale trading of Jewellery till March 2019. The Jewelries manufactured on Job-work basis at Ahmedabad and Rajkot. The design of its products is done either in house or by third parties on the company's behalf and get the Jewelleries manufacturing done on a job work basis.

As per the offer documents, the Company has started manufacturing Jewellery in house and reduces the dependence on getting jewellery manufactured on a job work basis. The in-house designing of the jewellery and in house manufacturing helps the company to have better management and coordination of man and material, better utilization of labour force, better inventory management and quality control on the final products. On account of its own manufacturing unit, The Company has complied with the stringent requirement norms of the known retail brand Jewellery showroom. The Client list of the Company includes leading reputed jewellery retailer which are multinational well-reputed and having a very good network. As of November 30, 2020, AGOL has 108 employees including management.

To part finance its plans for the establishment of a jewellery manufacturing unit (Rs. 1.00 cr.), working capital (Rs. 21.25 cr.) and general corpus fund (Rs. 7.25 cr.), AGOL is coming out with an FPO of 3705600 equity shares of Rs. 10 each at a fixed price of Rs. 81 per share to mobilize Rs. 30.02 cr. The issue opens for subscription on March 03, 2021, and will close on March 08, 2021. Minimum application is to be made for 1600 shares and in multiples thereon, thereafter. Post allotment shares will be listed with BSE SME. The issue constitutes 16.53% of the post issue paid-up capital of the company. The company will be spending Rs. 0.52 cr. for this FPO process. Expenses on the Jewellery Manufacturing unit relates to spending on furniture and fixtures and contingency expenses. From the March 2019 IPO proceeds, it raised Rs. 1.50 cr. for the establishment of jewellery manufacturing unit out of which Rs. 0.41 cr. remained as an unutilized amount (page 18 of offer document).

Having raised initial equity at par, AGOL raised further equity in the price range of Rs. 20 to Rs. 660 per share between March 2010 and March 2019. It has also issued bonus shares in the ratio of 65 shares for 1 share held 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.

For this FPO, the company has assigned a mandate to Mehta Integrated Finance Ltd. Bigshare Services Pvt. Ltd. is the registrar to the issue. Beeline Broking Ltd. is the Market Maker for this issue.

Post issue, AGOL's current paid-up equity capital of Rs. 21.29 cr. will stand enhanced to Rs. 25.00 cr. At the offer price, the company is looking for a market cap of Rs. 202.49 cr.

On the financial performance front, for the last three fiscals, AGOL has posted turnover/net profits of Rs. 46.93 cr. / Rs. 0.07 cr. (FY18), Rs. 88.20 cr. / Rs. 0.38 cr. (FY19), Rs. 120.66 cr. / Rs. 0.47 cr. (FY20). For the first half of the current fiscal ended on September 30, 2020, it has earned a net profit of Rs. 2.44 cr. on a turnover of Rs. 22.31 cr. This super performance is attributed to adjustment in inventories and hence raises concern.

For the last three fiscals, the company has posted an average EPS of Rs. 1.43 and an average RoNW of 0.99%. The issue is priced at a P/BV of 3.62 based on its NAV of Rs. 22.37 as of September 30, 2020, and at a P/BV of 2.69 based on its post-issue NAV of Rs. 30.06.

It appears that there have been inventory adjustments for the first half of the current fiscal; it would not be prudent to annualize it for the P/E ratio. Considering its average track record of the last three fiscal's average EPS, the issue is priced at a P/E of 56.64 on the current equity. Based on FY20 earnings the asking price is at a P/E of 426 (on post FPO equity basis) against the industry average of around 9.46.  Thus the issue is exorbitantly priced indicating the greed of promoters/merchant bankers.

As per offer documents, AGOL has shown D P Abhushan and Moksh Ornaments as its listed peers that are currently trading at a P/Es of around 11.21 and 7.76 (as of March 02, 2021). However, they are not comparable on an apple to apple basis.

This company's shares have seen a high/low of Rs. 82/Rs. 15 since listing. Perhaps to pave the way for this greedily priced offer, some market operations are done to jack up the price to Rs. 82 in Calendar Year (CY) 2021 for which the high/low so fare is Rs. 82 /Rs. 43. For the previous two CYs, the high/lows are Rs. 58.5 / Rs. 15 (CY 2019) and Rs. 48.50 / Rs. 34.20 (CY 2020).

The merchant banker associated with this issue has handled 1 issue in fiscal 2016 and thereafter, this is the second mandate from its stable in the last six years. The only listing that took place at that time opened at a premium of 0.5% on the day of listing.

Conclusion / Investment Strategy

It appears that to pave the way for this greedily priced FPO, some operations are done in the market by vested interests. If we consider the previous two CYs, the price remained below the IPO price for the most part of the period. If we see the trading range for the month of February 2021, it has marked a high/low of Rs. 77.00 / Rs. 50.00. The last traded price of AGOL is Rs. 75.00 (as on March 02, 2021). Simply stay away from such a greedy offer.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on March 2, 2021

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: ).

Ashapuri Gold Ornament FPO FAQs

  1. 1. Why Ashapuri Gold Ornament FPO?

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

  2. 2. How is Ashapuri Gold Ornament FPO?

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

  3. 3. Ashapuri Gold Ornament FPO what should investors do?

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

  4. 4. Is Ashapuri Gold Ornament FPO good?

    Our recommendation for Ashapuri Gold Ornament FPO is to avoid.

  5. 5. Is Ashapuri Gold Ornament FPO worth Investing?

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

  6. 6. When will Ashapuri Gold Ornament FPO allotment status?

    The Ashapuri Gold Ornament FPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit Ashapuri Gold Ornament FPO allotment status to check.

  7. 7. When will Ashapuri Gold Ornament FPO list?

    The Ashapuri Gold Ornament FPO will list on Wednesday, March 17, 2021, at BSE SME.