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Review By Dilip Davda on May 9, 2024
• IEL is in the manufacturing and supplying of specialty chemicals like Esters, Amphoterics etc.
• The company posted growing top and bottom lines for the reported periods.
• Based on FY24 annualized super earnings, the issue appears fully priced.
• Currently, we marked no fancy for the speciality chemical segment.
• Well-informed investors may park moderate funds for the long term.
ABOUT COMPANY:
Indian Emulsifier Ltd. (IEL) was incorporated with the objective of Manufacturing and Supplying of Specialty Chemicals i.e., Esters, Amphoterics, Phosphate Esters, Imidazolines, Wax Emulsions, SMO & PIBSA Emulsifiers. The Company has its manufacturing plant at Plot No. E-10 MIDC, Lote Parshuram, Tal. Khed, Ratnagiri 415 722, Maharashtra, India since inception. The facility has a production capacity of 4,800 metric tons per annum as on March 31, 2023 and 3,600 MT per annum for the period ended December 31, 2023, equipped with process control, innovative R&D centre, Quality Control and Application Laboratories.
The Company was formed with a vision to become a pioneer specialty chemicals manufacturer. It serves specialty chemicals to wide range of industries such as Mining, Textile, Cleaning Industry, PVC (Poly Vinyl Chloride)/ Rubber, Personal Care, Food and Other Industries. Multiple high-pressure stainless-steel reactors equipped to deliver yields from 100 Kg to 8,000 kg per batch providing high level of flexibility. The facility can carry out reactions at temperatures ranging from 10 C to 250 C and pressure 5 kg to 8kg/cm, the reactors are equipped with condenser, vacuum arrangement and receiver and high speed stirred reactor. As of December 31, 2023, it had 34 employees on its payroll.
ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 3211000 equity shares of Rs. 10 each to mobilize Rs. 42.39 cr. at the upper cap. It has announced a price band of Rs. 125 - Rs. 132 per share. The issue opens for subscription on May 13, 2024, and will close on May 16, 2024. The minimum application to be made is for 1000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.27% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 20.92 cr. for capex on purchase of plant and machinery, civil work and installation etc., Rs. 8.50cr. for working capital, and the rest for general corporate purposes.
The issue is solely lead managed by Ekadrisht Capital Pvt. Ltd., and Maashitla Securities Pvt. Ltd. is the registrar of the issue. SS Corporate Securities Ltd. is the market maker for the company.
After issuing initial equity capital at par the company issued further equity shares at a fixed price of Rs. 84 per share in November 2023. The average cost of acquisition of shares by the promoters is Rs. 3.87 per share.
Post-IPO, company's current paid-up equity capital of Rs. 9.01 cr. will stand enhanced to Rs. 12.22 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 161.33 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. NIL / Rs. - (0.00 4) cr. (FY21), Rs. 17.68 cr. / Rs. 0.04 (FY22), Rs. 41.18 cr. / Rs. 3.89 cr. (FY23). For 9M of FY24 ended on December 31, 2023, it earned a net profit of Rs. 6.75 cr. on a total income of Rs. 48.70 cr.
For the last three fiscals, it has reported an average EPS of Rs. 3.26, and an average RoNW of 6.57%. The issue is priced at a P/BV of 4.51 based on its NAV of Rs. 29.26 as of December 31, 2023, and at a P/BV of 2.35 based on its post-IPO NAV of Rs. 56.25 per share (at the upper cap).
If we attribute annualized FY24 earnings to its post-IPO fully diluted paid-up capital, then the asking price is at a P/E of 17.93, and based on FY23 earnings, the P/E stands at 41.38. Thus the issue appears fully priced. Currently, special chemical segment is not fancied by the investors.
For the reported periods, the company has posted PAT margins of NA% (FY21), 0.24% (FY22), 9.46% (FY23), 13.87% (9M-FY24), and RoCE margins of - (58.65) %, 7.19%, 55.50%, 38.03% respectively for the referred periods.
DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy based on its financial performance and future prospects.
COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Fine Organic, Fineotex Chemicals as their listed peers. They are trading at a P/E of 28.9 and 33.1 (as of May 09, 2024). However, they are not comparable on an apple-to-apple basis.
MERCHANT BANKER'S TRACK RECORD:
This is the first mandate from Ekadrisht Capital in the ongoing fiscal and has no track records so far.
Review By Dilip Davda on May 9, 2024
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 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: dilip_davda@rediffmail.com ).
The initial public offer (IPO) of Indian Emulsifier Limited offers an early investment opportunity in Indian Emulsifier Limited. A stock market investor can buy Indian Emulsifier IPO shares by applying in IPO before Indian Emulsifier Limited shares get listed at the stock exchanges. An investor could invest in Indian Emulsifier IPO for short term listing gain or a long term.
Read the Indian Emulsifier IPO recommendations by the leading analyst and leading stock brokers.
Indian Emulsifier IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Indian Emulsifier IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.
Our recommendation for Indian Emulsifier IPO is to subscribe for long term.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Indian Emulsifier IPO.
The Indian Emulsifier IPO allotment status will be available on or around May 17, 2024. The allotted shares will be credited in demat account by May 21, 2024. Visit Indian Emulsifier IPO allotment status to check.
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