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Debock Sales NSE SME IPO review (Avoid)

Review By Dilip Davda on May 20, 2018

Debock Sales and Marketing Ltd. (DSML) is engaged in the business of manufacturing and trading of agricultural equipment. It manufactures and supplies range of agricultural equipment mainly Tractor Trolley, Agricultural Thresher, Mould Board Ploughs, Mounted Disc Ploughs, Tillers, Tanker, Combine Machine, Seed Drill Machine, Mounted Disc Harrows, Tractor Cultivators, Chaff Cutters etc. DSML is also engaged in the hospitality services. Keeping in consideration the future concept of tourism in Rajasthan, particularly in Deoli district area, where there is no better option of hotels are available. Company decided to commence its business in hospitality services by opening a class hotel (Hotel Debock Inn) in July 2015 at Deoli in Tonk District on NH -12 in July 2015 and has entered into a MOU with Rajasthan Government.

To part finance its working capital and general corpus fund needs, DSML is coming out with a maiden IPO of 2220000 equity shares of Rs. 10 each with a fixed price of Rs. 20 per share to mobilize Rs. 4.44 crore. Issue opens for subscription on 24.05.18 and will close on 28.05.18. Minimum application is to be made for 6000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Issue is solely lead managed by Gretex Corporate Services Pvt.Ltd. and Cameo Corporate Services Ltd. is the registrar to the issue. Issue constitutes 27.01% of the post issue paid up capital of the company. Having raised initial equity at par, it raised further equity in the price range of Rs. 11 to Rs. 32 per share. Average cost of acquisition of shares by the promoters is Rs. 26.93 per share. Post issue, its current paid up equity capital of Rs. 6.00 cr. will stand enhanced to Rs. 8.22 cr.

On performance front, for last three fiscals, DSML has posted turnover/net profits of Rs. 4.09 cr. / Rs. 0.02 cr. (FY15), Rs. 10.27 crf. / Rs. – (0.02) cr., (FY16) and Rs. 16.15 cr. / Rs. 0.51 cr. (FY17). For first nine months ended on 31.12.17 of FY18 it has earned net profit of Rs. 0.27 cr. on a turnover of Rs. 7.71 cr. Thus while it has shown growth in top line, bottom line has remained in consistent. On an average basis, FY18 working so far lagging behind on top and bottom lines. If we annualize latest earnings and attribute it on fully diluted equity post issue then asking price is at a P/E of around 45 plus. Thus it is priced very aggressively.  For last three fiscals, it has posted an average EPS of Rs. 5.76 and an average RoNW of 16.23%. Issue is priced at a discount to its NAVs of Rs. 29.66 (31.12.17) and Rs. 27.05 (post issue). As per offer documents it has shown Sprayking Agro and Indian Hotels as it listed peers. Comparison with Indian Hotels is really surprising as it has no any star rating for hospitality business. Spraking is trading at a P/E of around 102 (as on 18.05.18) but cannot be compared with DSML as an apple to apple as it is in brass part manufacturing.

On merchant banker’s front, this is the 11th mandate from its stable in last three fiscals. Out of last 10 listings 3 opened at discount, 4 at par and 3 with a premium ranging from 1.92% to 8% on the day of listing.


Conclusion / Investment Strategy

Company’s working is inconsistent, issue is priced aggressively. Investors may give this highly priced issue a miss.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on May 20, 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

Debock Sales IPO FAQs

  1. 1. Why Debock Sales IPO?

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

  2. 2. How is Debock Sales IPO?

    Read the Debock Sales IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Debock Sales IPO what should investors do?

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

  4. 4. Is Debock Sales IPO good?

    Our recommendation for Debock Sales IPO is to avoid.

  5. 5. Is Debock Sales IPO worth Investing?

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

  6. 6. When will Debock Sales IPO allotment status?

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

  7. 7. When will Debock Sales IPO list?

    The Debock Sales IPO will list on Tuesday, June 5, 2018, at NSE SME.