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Kotyark Ind NSE SME IPO review (May apply)

Review By Dilip Davda on Oct 16, 2021

•    KIL is in the manufacturing and marketing of biofuels (Green energy).
•    Its capacity utilization is scaling up based on rising demands.
•    The company suffered a setback in FY20 in line with general trends.
•    Based on its financial parameters, the issue is aggressively priced.
•    Bio-fuel demand is rising and the company is poised for bright prospects ahead.

ABOUT COMPANY:
Kotyark Industries Ltd. (KIL) is primarily engaged in the manufacturing of BioFuel which is an alternative source of energy and has the ability to replace and a good substitute of traditional fossil fuels like coal, firewood, lignite, etc. The company is serving towards renewable green energy and sustainable development of renewable natural resources (Biofuels) through the adoption of environmentally friendly technology that favours the net reduction of greenhouse gas emissions for use in a vehicle for public and private transport as well as various equipment and Gen Sets.

Driven by experience in agriculture, innovation and investment in Research & Development, as biofuel is a substitute for the traditional fossil fuels and with the indiscriminate exploitation of all fossil fuels, KIL seemed to capitalize on the growing global demand for an alternate source of renewable energy and thus incorporated the company in the year 2016 for trading and manufacturing of Bio Fuel. Till 2019 May the company was primarily in the trading business of bio-fuels and later ventured into manufacturing of the bio-fuels of different variants. It has set mobile retail outlets to market its products. As of July 31, 2021, KIL had 23 employees on its payroll. 

KIL has received 25 licenses from Govt. of Rajasthan for dealers and the company has 17 such dealers as of July 31, 2021. It can go up to 250 licenses going forward. The increasing number of dealers has helped the company to scale up its capacity utilization. KIL's capacity utilization which was just 3.46% of the installed capacity has arisen to 12.30% in Q1 FY22. The management is confident of higher utilization of capacities with rising demand for this kind of green energy.

ISSUE DETAILS/CAPITAL HISTORY:
To meet its requirements for working capital (Rs. 8.30 cr.), general corporate funds (Rs. 2.36 cr.), KIL is coming out with a maiden IPO of 2208000 equity shares of Rs. 10 each at a fixed price of Rs. 51 per share to mobilize Rs. 11.26 cr. The issue opens for subscription on October 21, 2021, and will close on October 25, 2021. Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge.  The issue constitutes 26.68x% of the post issue paid-up capital of the company. KIL is spending Rs. 0.60 cr. for this IPO process. 

The issue is solely lead managed by Beeline Broking Ltd. and KFin Technologies Pvt. Ltd. is the registrar to the issue. Sunflower Broking Pvt. Ltd. is acting as a market maker for this company. 

KIL issued/placed initial equity capital at par and then raised further equity at Rs. 40 per share in July 2021. It has also issued bonus shares in the ratio of 2 for 1 in July 2021. The average cost of acquisition of shares by the promoters is Rs. 6.89 per share.

Post issue, KIL's current paid-up equity capital of Rs. 6.07 cr. will stand enhanced to Rs. 8.27 cr. (8274900 shares). Based on the IPO pricing, the company is looking for a market cap of Rs. 42.20 cr. 

FINANCIAL PERFORMANCE: 
On the financial performance front, KIL has posted turnover/net profits of Rs. 37.57 cr. / Rs. 0.58 cr. (FY19), Rs. 25.78 cr. / Rs. 0.49 cr. (FY20) and Rs. 65.29 cr. / Rs. 1.04 cr. (FY21). For the first four months ended on July 31, 2021, of FY22, it has reported a net profit of Rs. 0.52 cr. on a turnover of Rs. 28.11 cr. 

For the last three fiscals, for the last three fiscals, KIL has reported an average EPS of Rs. 2.70 and an average RoNW of 29.78%. The issue is priced at a P/BV of 2.08 based on its NAV of Rs. 24.52 as of July 31, 2021, and at a P/BV of 2.48 based on its post-IPO NAV of Rs. 20.53.

If we annualize FY22 earnings and attribute it to a fully diluted post-IPO paid-up equity base, then the asking price is at a P/E of 27 making it an aggressively priced issue. However, considering rising trends for bio-fuel and the company's ability to scale up capacity utilization, it is poised for bright prospects going forward.

COMPARISON WITH LISTED PEERS:
As per offer documents, KIL has no listed peers to compare with. 

DIVIDEND POLICY:
The company has not declared any dividend since incorporation. It will adopt a prudent dividend policy post listing based on its financial performance and future prospects. 

MERCHANT BANKER'S TRACK RECORDS:
This is the 13th mandate from Beeline Broking in the last four fiscals (Including the ongoing one). Out of the last 10 listings, 3 opened at discount, 1 at par and the rest with premiums ranging from 1.37% to 9% on the day of listings. D K Enterprises is yet to be listed.


Conclusion / Investment Strategy

KIL is the first mover in the bio-fuel segment and has met with good demand for its products. It is scaling up its capacity utilization based on demands and poised for bright prospects ahead. Though the issue appears aggressively priced based on current financial parameters, cash surplus/risk seeker investors may consider an investment with a long term perspective.

Review By Dilip Davda on Oct 16, 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

Kotyark Industries IPO FAQs

  1. 1. Why Kotyark Industries IPO?

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

  2. 2. How is Kotyark Industries IPO?

    Read the Kotyark Industries IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Kotyark Industries IPO what should investors do?

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

  4. 4. Is Kotyark Industries IPO good?

    Our recommendation for Kotyark Industries IPO is to subscribe for long term.

  5. 5. Is Kotyark Industries IPO worth Investing?

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

  6. 6. When will Kotyark Industries IPO allotment status?

    The Kotyark Industries IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit Kotyark Industries IPO allotment status to check.

  7. 7. When will Kotyark Industries IPO list?

    The Kotyark Industries IPO will list on Tuesday, November 2, 2021, at NSE SME.

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