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Empyrean Cashews NSE SME IPO review (Avoid)

Review By Dilip Davda on March 18, 2022

•    ECL is engaged in the processing of cashew nuts into kernels in different flavours. 
•    It posted declining trends in the top and bottom lines for the last three fiscals. 
•    Boosted margins for FY22 so far raises eyebrows.
•    The company is in a highly competitive and fragmented segment. 
•    The issue is aggressively priced even on the basis of super FY22 performance so far. 

Empyrean Cashews Ltd. (ECL) commenced operations in 2014 under the name and style of the brand "Krishival Cashews". The Company was incorporated in 2014 and is engaged in processing raw cashew nuts into finished cashew kernels in different flavours, with a presence in more than 26 tier II and tier III towns and cities. It primarily caters to the domestic market with a network of more than thirty (30) distributors across India. ECL procures the majority of raw materials by way of import from certain African and Asian countries and also from the Konkan region of India. 

The company focuses on the quality of products to increase its presence across the country. As of the date of this Prospectus, it has one Subsidiary namely, Siddhivinayak Cashew Industries Private Limited. In addition to processing raw cashews, it is also engaged in the business of organic manure which is prepared by using by-products like husk and other biodegradable material left after the processing of the raw cashews. Based on the audited restated financials for FY 2021, 93% of its revenue is derived from the sale of cashews whilst the remaining 7% is derived from the sale of organic manure.

As of December 31, 2021, it has 196 employees on its payroll. Its capacity utilization marked a roller-coaster. Capacity utilization was 69% for FY19, 70% FY20, 40% for FY21 and 46.75% for the FY22 till the first seven months. 

To part finance its needs for working capital (Rs. 15.00 cr.), general corporate purpose (Rs. 3.74 cr.), ECL is coming out with a maiden IPO of 5247000 equity shares of Rs. 10 each at a fixed price of Rs. 37 per share to mobilize Rs. 19.41 cr. The issue opens for subscription on March 21, 2022, and will close on March 23, 2022. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on the NSE SME Emerge platform. The issue constitutes 26.50% of the post issue paid-up capital of the company. ECL will be spending Rs. 0.67 cr. for this IPO process. 

The issue is solely lead managed by Systematix Corporate Services Ltd. and Purva Sharegistry (India) Pvt. Ltd. is the registrar to the issue. Systematix Shares and Stocks (India) Ltd. is the market maker for this company.  

The company has raised entire equity capital at par value so far. The average cost of acquisition of shares by the promoters is Rs. 10 per share. 

Post-IPO, ECL's current paid-up equity capital of Rs. 14.55 cr. will stand enhanced to Rs. 19.80 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 73.24 cr. 

On the financial performance front, for the last three fiscals, ECL has posted turnover/net profits of Rs. 50.47 cr. / Rs. 0.65 cr. (FY19), Rs. 44.39 cr. / Rs. 0.96 cr. (FY20) and Rs. 28.58 cr. / Rs. 0.67 cr. (FY21). For the first seven months of FY22 ended on October 31, 2021, it has earned a net profit of Rs. 1.67 cr. on a turnover of Rs. 27.23 cr. 

For the last three fiscals, ECL has posted an average EPS of Rs. 0.53 and an average RoNW of 3.99%. The issue is priced at a P/BV of 2.55 based on its NAV of Rs. 14.51 as of October 31, 2021, and at a P/BV of 1.81 based on its post-IPO NAV of Rs. 20.47. 

If we annualize FY22 earnings and attribute it to fully diluted post-IPO paid-up equity capital, then the asking price is at a P/E of 25.69. 

The company has not paid any dividends so far. It will adopt a prudent dividend policy post listing based on its financial performance and future prospects. 

As per the offer document, ECL has no listed peers to compare with. 

The last mandate from Systematix was in March 2018 and there were no mandates from FY18-19 to FY20-21. So this is the first mandate after long in FY21-22. The Annexure is missing from offer documents on its track records. March 2018 2 mandates opened with a premium ranging from 0.18% to 5.61% on the day of listing and currently trading at a discount.

Conclusion / Investment Strategy

The company is operating in a fragmented and highly competitive field. Its financial data does not match the issue pricing which is aggressive even on the basis of super FY22 performance so far. Its capacity utilization is also very poor. There is no harm in ignoring this pricy issue.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on March 18, 2022

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: ).

Empyrean Cashews IPO FAQs

  1. 1. Why Empyrean Cashews IPO?

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

  2. 2. How is Empyrean Cashews IPO?

    Read the Empyrean Cashews IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Empyrean Cashews IPO what should investors do?

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

  4. 4. Is Empyrean Cashews IPO good?

    Our recommendation for Empyrean Cashews IPO is to avoid.

  5. 5. Is Empyrean Cashews IPO worth Investing?

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

  6. 6. When will Empyrean Cashews IPO allotment status?

    The Empyrean Cashews IPO allotment status will be available on or around March 28, 2022. The allotted shares will be credited in demat account by March 30, 2022. Visit Empyrean Cashews IPO allotment status to check.

  7. 7. When will Empyrean Cashews IPO list?

    The Empyrean Cashews IPO will list on Thursday, March 31, 2022, at NSE SME.