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Deep Polymers BSE SME IPO review (May apply)

Review By Dilip Davda on Aug 4, 2018

•    Company is in highly competitive field.
•    Last four fiscals’ top line is stagnant around Rs. 41 crore.
•    Issue is fully priced with a P/E of around 22
•    Merchant banker has poor track record.

About Company:
Deep Polymers Ltd. (DPL) is engaged in manufacturing colour and additive masterbatches for engineering plastics and compounds that includes wide range of quality products like antifab fillers, transparent fillers, colour fillers, which is used as cost effective replacements for polymers and acts as anti-fibrillating, anti-blocks, anti-slip agents. Having started with a capacity of 600 mtpa of master batches production in 1992, currently it has a capacity of 12000 mtpa for colour master batches and 25000 mtpa of filler master batches. It has a whole range of Masterbatches such as Anti-fab Fillers, Transparent Fillers, Color Fillers, White Masterbatches, Special Effect Masterbatches, Additive Masterbatches etc.

Issue details:
To part finance its working capital and general corpus fund needs,  DPL is coming out with a maiden IPO of 3810000 equity shares of Rs. 10 each (comprising 1360000 fresh equity shares and 2450000 shares via offer for sale by existing stakeholders) at a fixed price of Rs. 40 per share to mobilize Rs. 15.24 crore. Issue opens for subscription on 08.08.18 and will close on 13.08.18. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue is solely lead managed by Gretex Corporate Services Pvt. Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue.  Issue constitutes 32.09% of the post issue paid up capital of the company. Having issued initial equity at par, it raised further equity in the price range of Rs. 50 to Rs. 125 per share between March 2007 and June 2015. It has also issued bonus shares in the ratio of 10 for 1 in March 2018. Post issue, DPL’s current paid up equity capital of Rs. 10.51 cr. will stand enhanced to Rs. 11.87 cr. Average cost of acquisition of shares by the promoters is Rs. 1.39 per share.

Financial performance:
On performance front, for last four fiscals, DPL has (on a consolidated basis) posted turnover/net profits of Rs. 41.14 cr. / Rs. 0.67 cr. (FY15), Rs. 36.01 cr. / Rs. – (0.35) cr. (FY16), Rs. 42.74 cr. / Rs. 1.28 cr. (FY17) and Rs. 41.10 cr. / Rs. 2.15 cr. (FY18). Higher net for last two fiscals is a result of lower finance cost and depreciations. In FY 18 company posted other income of Rs. 1.31 cr. against Rs. 0.27 cr. for FY17. For last three fiscals it has posted an average EPS of Rs. 1.52 and an average RoNW of 8.34% (on consolidated basis).Issue is priced at a P/BV of 2.04 on the basis of its NAV of Rs. 19.57 (on consolidated basis). If we take latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 22.

Peers comparison:
As per offer documents, it has shown Plastiblends and Clariant Chemicals as its listed peers. Although both are not strictly comparable, they are trading at a P/E of around 23 and 43 as on 03.08.18.

Merchant Banker’s track record:
On merchant banker’s front, this is the 13th mandate from its stable in last three years. Out of last 10 listings, 3 opened at discount, 4 at par and 3 with a premium ranging from 1.9% to 8% on the day of listing. Thus it has poor track record.


Conclusion / Investment Strategy

Issue is fully priced. Company’s top line is almost stagnant for last four fiscals. Merchant banker has poor track record. Cash surplus risk savvy investors may consider investment at their own risk.

Review By Dilip Davda on Aug 4, 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

Deep Polymers Limited FAQs

  1. 1. Why Deep Polymers Limited?

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

  2. 2. How is Deep Polymers Limited?

    Read the Deep Polymers Limited recommendations by the leading analyst and leading stock brokers.

  3. 3. Deep Polymers Limited what should investors do?

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

  4. 4. Is Deep Polymers Limited good?

    Our recommendation for Deep Polymers Limited is to subscribe for long term.

  5. 5. Is Deep Polymers Limited worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Deep Polymers Limited.

  6. 6. When will Deep Polymers Limited allotment status?

    The Deep Polymers Limited allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit Deep Polymers Limited allotment status to check.

  7. 7. When will Deep Polymers Limited list?

    The Deep Polymers Limited will list on Thursday, August 23, 2018, at BSE SME.