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D K Enterprises NSE SME IPO review (May apply)

Review By Dilip Davda on Oct 4, 2021

•    DEGL in the business of manufacturing paper-based packaging materials and adhesive tapes.
•    It is coming with the maiden IPO based on the last two fiscal's performance.
•    On the financial performance front, it has posted growing patterns.
•    Based on FY22 annualized earnings, the issue appears reasonably priced. 
•    Investors may consider investing with a long term perspective.

ABOUT COMPANY:
DK Enterprises Global Ltd. (DEGL) is mainly engaged in manufacturing of Paper-Based Packing Material, Self-Adhesive Tapes (specialty tapes likes Masking, Siliconized, Medical and Surface protection Tapes), Laminated Products and Flexible Packaging. It has been working almost exclusive with major multinational corporations in the consumer space.

D.K. Enterprises, a proprietorship firm of one of the promoters running its business for the last two decades which was taken over by DEGL (including all its movable assets, current assets and liabilities of manufacturing facilities of Panchkula and Vadodara) at a total consideration of Rs. 2.00 cr. (including goodwill of Rs. 162079.48) in terms of the agreement dated May 15, 2019, by issuing 20,00,000 Equity Shares of Rs. 10 each of the company to the promoter.

The company's registered office and manufacturing facilities Unit I is located in Panchkula at Haryana and Unit II at Vadodra in Gujarat. It is proposing to commence manufacturing facilities at Baddi in Himachal Pradesh for manufacturing of Clear/Printed Bopp Tape, Masking/specialty tapes and Laminated Products. The company also proposing to installed machinery at Vadodara (Unit II) for the manufacturing of Clear/Printed Bopp Tape, Masking/specialty tapes and Laminated Products.

At present, it is also holding an 80% stake in a partnership firm namely M/s. Satguru Engravures which is engaged in manufacturing and sale of Soap Stiffeners, Soap Wrappers, Banding BOPP Tapes, Laminates etc. and its manufacturing facilities is located at Khasra No. 619/489, Village Koundi, Tehsil Baddi, Distt. Solan, Himachal Pradesh.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for setting up of new manufacturing unit at Baddi (Rs. 3.05 cr.), working capital (Rs. 3.10 cr.), general corporate purpose (Rs. 1.05 cr.), DEGL is coming out with a maiden IPO of 1998000 equity shares of Rs. 10 each at a fixed priced of Rs. 40 per share to mobilize Rs. 7.99 cr. The issue opens for subscription on October 07, 2021, and will close on October 12, 2021. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.61% of the post issue paid-up capital of the company. DEGL will spend Rs. 0.79 cr. for this IPO process. It indicates pre-funding arrangements are done for this fully structured issue. 

The issue is solely lead managed by Beeline Broking Ltd. and Skyline Financial Services Pvt. Ltd. is the registrar to the issue. Nikunj Stock Brokers Ltd. is a market maker for this IPO. 

Having issued/converted initial equity at par, the company raised further equity at Rs. 40 per share in March 2021 and has also issued bonus shares in the ratio of 1 for 1 in April 2021. 

The average cost of acquisition of shares by the promoters is Rs. 6.04, Rs. 19.18 and Rs. 19.49 per share. 

Post issue, DEGL's current paid-up equity capital of Rs. 5.51 cr. will stand enhanced to 7.51 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 30.03 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, DEGL has (on a consolidated basis) reported turnover/net profit of Rs. 45.55 cr. / Rs. 1.50 cr. (FY20) and Rs. 64.96 cr. / Rs. 2.44 cr. (Fy21). For the first three months of FY22 ended on June 30, 2021, it has earned a net profit of Rs. 1.00 cr. on a turnover of Rs. 19.13 cr.  

For the last two fiscals, it has posted an average EPS of Rs. 5.35 and an average RoNW of 35.61%. The issue is priced at a P/BV of xx based on its NAV of Rs. 14.48 per share as of March 31, 2021, and at a P/BV of xx based on its post-issue NAV of Rs. 22.85 per share. 

If we attribute FY22 annualized earnings on fully diluted post issue paid-up equity capital of the company, then the asking price is at a P/E of 7.51 making this IPO a reasonably priced bet. 

COMPARISON WITH LISTED PEERS:
As per the offer documents, DEGL has shown Anuroop Packaging, Hindustan Adhesives and GKP Printing as its listed peers. They are currently trading at a P/E of 25.09, 15.56 and 86.85 (as of October 04, 2021). However, they are not comparable on an apple to apple basis. 

DIVIDEND POLICY:
Since its inception, the company has not declared any dividend till now. Post listing, it will adopt a prudent dividend policy based on its financial performance and future prospects. 

MERCHANT BANKER'S TRACK RECORDS:
This is the 12th mandate from Beeline in the last four fiscals (including the ongoing one). Samor Reality is yet to be listed. Out of the last 10 listings, 3 opened at discount, 1 at par and the rest at the premiums ranging from 1.37% to 10% on the date of listings. Thus it has an average track record.


Conclusion / Investment Strategy

DEGL is working in a segment that has bright prospects ahead. Though there are many players in the field, its lucrative pricing makes it a long term bet. The only concern is the average track record of the Lead Manager. Investors may consider investing in this reasonably priced issue.

Review By Dilip Davda on Oct 4, 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. 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

DK Enterprises Global IPO FAQs

  1. 1. Why DK Enterprises Global IPO?

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

  2. 2. How is DK Enterprises Global IPO?

    Read the DK Enterprises Global IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. DK Enterprises Global IPO what should investors do?

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

  4. 4. Is DK Enterprises Global IPO good?

    Our recommendation for DK Enterprises Global IPO is to subscribe for long term.

  5. 5. Is DK Enterprises Global IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the DK Enterprises Global IPO.

  6. 6. When will DK Enterprises Global IPO allotment status?

    The DK Enterprises Global IPO allotment status will be available on or around Oct 18, 2021. The allotted shares will be credited in demat account by Oct 20, 2021. Visit DK Enterprises Global IPO allotment status to check.

  7. 7. When will DK Enterprises Global IPO list?

    The DK Enterprises Global IPO will list on Friday, October 22, 2021, at NSE SME.

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