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Comrade Appliances BSE SME IPO review (Avoid)

Review By Dilip Davda on May 26, 2023

•    CAL is in the business of manufacturing and marketing air coolers/electric geysers. 
•    It has posted an average performance so far. 
•    The sudden boost in bottom lines for FY23 appears to be the window dressing.
•    Based on FY23 boosted earnings the issue is priced aggressively. 
•    There is no harm in skipping this pricey bet. 

Comrade Appliances Ltd. (CAL) is engaged in the process of manufacturing an extensive array of Air Coolers and Electric Geysers. It manufactures consumer durable goods and assembles a wide array of products and provides end-to-end product solutions. CAL serves under both original equipment manufacturer ("OEM") and original design manufacturer ("ODM") business models. Under the OEM model, it manufactures and supplies products basis designs developed by customers, who then further distribute these products under their own brands. Under the ODM model, in addition to manufacturing, it conceptualizes and designs the products which are then marketed to customers' prospective customers under their brands. CAL's current product portfolio of consumer goods includes (I) Air Coolers; (ii) Electric Geysers. 

The company offers innovative solutions to customers, which include leading international and national consumer brands. CAL's comprehensive solution suite includes global sourcing, fabrication of components and parts, captive manufacturing and assembly, quality testing, packaging and logistics support, which enables it to partner with leading consumer goods brands in India. Its key customers include leading brands in consumer durables. 

The company has a brand name, Comrade. It manufactures and sells products under the brand name of "Comrade". As of the date of this Red Herring Prospectus, the company has three registered designs for products and two trademarks. As of January 31, 2023, it had 52 employees on its payroll.

The company is coming out with a maiden IPO of 2278000 equity shares of Rs. 10 each via a book-building process. It has announced a price band of Rs. 52 - Rs. 54 per share and mulls mobilizing Rs. 12.30 cr. at the upper cap. The issue opens for subscription on May 31, 2023, and will close on June 05, 2023. The minimum application to be made is for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 30.26% of the post-IPO paid-up capital of the company. Excluding the reserve portion for the market maker for 114000 shares, the company has allocated 1080000 shares for QIBs (including Anchor portion of 648000 shares), 326000 shares for HNIs and 758000 shares for Retail investors. 

The company is spending Rs. 2.79 cr. for this IPO process. From the net proceeds, it will utilize Rs. 7.20 cr. for the working capital and the rest for general corporate purposes. Higher spending indicates fully structured funding arrangements for the issue. 

Gretex Corporate Services Ltd. is the sole lead manager and Bigshare Services Pvt. Ltd. is the registrar of the issue. Gretex Group's Gretex Share Broking Pvt. Ltd. is the market maker for the company. 

Having issued initial equity at par value, the company converted further equity shares in the price range of Rs. 12 - Rs. 30 between December 2021 and January 2023. The average cost of acquisition of shares by the promoters is Rs. 10.00 and Rs. 12.00 per share. 

Post-IPO, CAL's current paid-up equity capital of Rs. 5.25 cr. (5250795 shares) will stand enhanced to Rs. 7.53 cr. (7528795 shares). At the upper cap of the IPO pricing, the company is looking for a market cap of Rs. 40.66 cr. 

On the financial performance front, for the last three fiscals, CAL has posted a turnover/net profit of Rs. 26.04 cr. / Rs. 0.20 cr. (FY21), Rs. 29.73 cr. / Rs. 0.39 cr. (FY22), and Rs. 26.99 cr. / Rs. 1.64 cr. (FY23). Though it suffered a setback in the top line for FY23, a sudden boost in the bottom line on lower turnover raise eyebrows and hints at some window dressing to pave the way for fancy pricing of the IPO. 

For the last three fiscals, CAL has reported an average EPS of Rs. 2.01 and an average RoNW of 15.83%. The issue is priced at a P/BV of 4.07 based on its NAV of Rs. 13.28 as of March 31, 2023, and at a P/BV of 2.48 based on its post-IPO NAV of Rs. 21.79 per share (at the upper cap). 

If we attribute FY23 earnings to post-IPO paid-up equity capital, the asking price is at a P/E of 24.88. Thus the issue is priced aggressively. Its peers' comparison appears to be the eyewash only. 

The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy post-listing, based on its financial performance and future prospects. 

As per the offer document, the company has shown Dixon Tech (a great surprise) and PG Electroplast as their listed peers. They are currently trading at a P/E of 103.25, and 80.16 (as of May 26, 2023). However, they are not truly comparable on an apple-to-apple basis. It could have considered Symphony as its listed peer that is currently trading at a P/E of around 35.92. 

This is the 15th mandate from Gretex Corp in the last three fiscals (including the ongoing one). Out of the last 10 listings, 2 opened at discount, 1 at par and the rest listed at premiums ranging from 1.31% to 90% on the listing date. 

Conclusion / Investment Strategy

The company operates in a highly competitive and fragmented segment with many big players around. The sudden boost in its bottom line for FY23 raises eyebrows and concerns over sustainability going forward. Based on such super earnings, the issue appears aggressively priced. Small equity capital post-IPO indicates a longer gestation period for migration to the mainboard. Its IPO spending to the tune of 22.68% also raises concern. There is no harm in skipping this pricey issue.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on May 26, 2023

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: ).

Comrade Appliances IPO FAQs

  1. 1. Why Comrade Appliances IPO?

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

  2. 2. How is Comrade Appliances IPO?

    Read the Comrade Appliances IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Comrade Appliances IPO what should investors do?

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

  4. 4. Is Comrade Appliances IPO good?

    Our recommendation for Comrade Appliances IPO is to avoid.

  5. 5. Is Comrade Appliances IPO worth Investing?

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

  6. 6. When will Comrade Appliances IPO allotment status?

    The Comrade Appliances IPO allotment status will be available on or around June 8, 2023. The allotted shares will be credited in demat account by June 12, 2023. Visit Comrade Appliances IPO allotment status to check.

  7. 7. When will Comrade Appliances IPO list?

    The Comrade Appliances IPO will list on Tuesday, June 13, 2023, at BSE SME.