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KN Agri NSE SME IPO review (Apply)

Review By Dilip Davda on Mar 11, 2022

•    KNARL is engaged in agro-based activities as a trader, solvent extractor, refiner.
•    It suffered a severe setback for FY20 on account of lower agri outputs and un-remunerative pricing.
•    It is reaping the benefits of its strategic locations for production. 
•    Investors may consider investment for short to long term in this lucrative offer. 

ABOUT COMPANY: 
KN Agri Resources Ltd. (KNARL) was originally incorporated as Itarasi Oils and Flours Pvt. Ltd. and subsequently changed its name to the current one in October 2021. KNARL is an agro-based company primarily engaged in the business of solvent extractions, oil refining and trading of various agro commodities. Its wide range of product baskets includes processed and manufactured products that include soya meal, soya refined oil, soya crude oil, degummed oil, soya lecithin, acid oil, soya husk, cottonseed oil, refined rapeseed oil etc. Under the agro-commodity business, it trades in products like maize, gram, pulses, sugar, soyabean, wheat etc. 

It's all three plants are strategically located in Madhya Pradesh giving it an edge over other players in terms of procurement and availability of major raw materials. It has a current capacity of 375000 TPA for solvent extractions, 60000 TPA for edible oil refining and 24000 TPA for flour milling. 

At present, the company is marketing its products in 15 states in India and also exports to countries like the Netherlands, Singapore, Bangladesh, Nepal etc. Its refined oil is being marketed under the brand names of "CLASSIC" and" KHAN-PAN". The company also has four wind energy power plants with a combined capacity of 4.60 MW. This operation is totally outsourced from third parties. As of January 31, 2022, it had 218 permanent employees on its payroll. It also employs manpower on a contractual basis as and when needed. 

ISSUE DETAILS/CAPITAL HISTORY: 
To part finance its needs for working capital (Rs. 40.00 cr.) and general corporate purpose, KNARL is coming out with a maiden book building process IPO with fresh equity issue of 6584000 equity shares of Rs. 10 each. It has fixed a price band of Rs. 71 - Rs. 75 per share and a minimum application to be made for 1600 shares and in multiples thereon, thereafter. At the upper cap of the price band, the company is looking for a kitty of Rs. 49.38 cr. The issue opens for subscription on March 15, 2022, and will close on March 17, 2022. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.34% of the post issue paid-up capital of the company. The company has allocated 50% for QIBs, 15% for HNIs and 35% for Retail investors. 

The company has issued entire equity at par thus far and has also issued bonus shares in the ratio of 139 for 10 shares held in March 2021. The average cost of acquisition of shares by the promoters is Rs. 0.33 and Rs. 0.67 per share. 

The issue is solely lead managed by Hem Securities Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue. Hem Finlease Pvt. Ltd. is the market maker for this company. 

Post-IPO KNARL's current paid-up equity capital of Rs. 18.42 cr. will stand enhanced to Rs. 25.00 cr. At the upper cap, the company is looking for a market cap of Rs. 187.49 cr. 

FINANCIAL PERFORMANCE: 
On the financial performance front, on a consolidated basis, KNARL has posted turnover/net profits of Rs. 1292.47 cr. / Rs. 21.40 cr. (FY19), Rs.853.20 cr. / Rs. 13.21 cr. (FY20) and Rs. 1301.19 cr. / Rs. 26.19 cr. (FY21). It suffered a severe setback for FY20 on account of lower agricultural produce and un-remunerative prices prevalent during that period. Such a period comes in this type of industry during unpredicted bad calamity.

For the first half of FY22 ended on September 30, 2021, it has earned a net profit of Rs. 16.84 cr. on a turnover of Rs. 594.68 cr. 

For the last three fiscals, the company posted an average EPS of Rs. 11.44 and an average RoNW of 14.57%. The issue is priced at a P/BV of 0.79 on the basis of its NAV of Rs. 95.37 as of September 30, 2021, and at a P/BV of 0.83 based on its post-IPO NAV of Rs. 90.00. (based on upper cap). 

If we annualize its FY22 earnings and attribute it to the fully diluted post-IPO paid-up equity, then the asking price is at a P/E of around 5.57, making it a lucratively priced bet.

COMPARISON WITH LISTED PEERS: 
As per the offer documents, KNARL has shown Ruchi Soya, Gujarat Ambuja Exports, Gokul Agro and Kriti Nutrients as its listed peers. They are currently trading at a P/E of around 26.83, 12.42, 15.14 and 23.44 (as of March 11, 2022). However, they are not truly comparable on an apple to apple basis. 

DIVIDEND POLICY:
KNARL has not paid any dividend in the reported periods of the offer documents. It will adopt a prudent dividend policy post listing, based on its financial performance and future prospects. 

MERCHANT BANKER'S TRACK RECORD:
This is the 14th mandate from Hem Securities in the last three fiscals (including the ongoing one). Out of the last 10 listings, 1 opened at discount, 2 at par and the rest with premiums ranging from 2.5% to 114.94% on the day of listings. 


Conclusion / Investment Strategy

This issue from the FMCG segment is priced lucratively. It has a sound track record except for FY20 where it suffered a setback following a bad calamity. Investors may consider investing in it for short to long term rewards.

Reviewer recommends Subscribing to the issue.

Review By Dilip Davda on Mar 11, 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. 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

KN Agri IPO FAQs

  1. 1. Why KN Agri IPO?

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

  2. 2. How is KN Agri IPO?

    Read the KN Agri IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. KN Agri IPO what should investors do?

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

  4. 4. Is KN Agri IPO good?

    Our recommendation for KN Agri IPO is to subscribe.

  5. 5. Is KN Agri IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe to the KN Agri IPO.

  6. 6. When will KN Agri IPO allotment status?

    The KN Agri IPO allotment status will be available on or around Mar 23, 2022. The allotted shares will be credited in demat account by Mar 25, 2022. Visit KN Agri IPO allotment status to check.

  7. 7. When will KN Agri IPO list?

    The KN Agri IPO will list on Monday, March 28, 2022, at NSE SME.

1 Comments

1. AnilG  
Is there restriction on SME share selling as compare to application
1.1. TJ  
Yes there will be a slight variation in the selling price usually it will be always lower to the price shown in index for example a price of x share is trading at rs .100 you can sell yours at rs.98 and its just an example real time values may differ