Mahickra Chemicals NSE SME IPO review (Avoid)

Review By Dilip Davda on Apr 6, 2018


Mahickra Chemicals Ltd. (MCL) is in the business of manufacturing of Reactive Dyes since year 1998, while the business of trading in Reactive Dyes was started in year 1994. The Company manufactures Reactive Dyes also known as Synthetic Organic Dyes (S.O. Dyes) and has an integrated process. The company specializes in Black Reactive Dyes. It manufactures 40 various types of Reactive Dyes. The product of the company caters to textiles & garments manufacturers. The company also offers specialty performance chemicals to the Textile Dyeing and printing industry. The company has a production capacity of approx. 900 tons per annum. The manufacturing facility of the company is situated at Vatva GIDC in Gujarat. MCL is an ISO 9001:2015, ISO 14001:2015 and GOTS certified company certifying the quality of the product it manufactures.

To part finance its working capital and general corpus fund needs, MCL is coming out with a maiden IPO of 2100000 equity shares of Rs. 10 each via book building route with a price band of Rs.24 – Rs. 25 to mobilize Rs. 5.04 to Rs. 5.25 crore (based on lower and upper price bands). Issue opens for subscription on 16.04.18 and will close on 18.04.18. Minimum application is to be made for 6000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge.  Issue is solely lead managed by Pantomath Capital Advisors Pvt. Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Issue constitutes 29.05% of the post issue paid up capital of the company. Having raised initial equity at par it raised further equity in the price range of Rs. 20 and Rs. 24 in December 2017 and January 2018 respectively. Average cost of acquisition of shares by the promoters is Rs. 10 and Rs. 11.33 per share. Post issue, MCL's current paid up capital of Rs. 5.13 crore will stand enhanced to Rs. 7.23 crore.

On performance front, MCL has posted turnover/net profits of Rs. 43.56 cr. / Rs. 0.17 cr. (FY14), Rs. 42.75 cr. / Rs. 0.09 cr. (FY15), Rs. 34.79 cr. / Rs. 0.15 cr. (FY16) and Rs. 42.26 cr. / Rs. 0.35 cr. (FY17). For the current fiscal it has shown two breaking periods of performance from 01.04.17 to 12.11.17 and from 13.11.17 to 31.12.17. It we combined both then it has earned net profit of Rs. 0.36 cr. on a turnover of Rs. 40.90 crore for first nine months. It suffered a setback in top line for FY 16 and sudden jump in bottom line for FY 17 raising concern. Except FY16, its top line remained mostly static between FY14 and FY17. For last three fiscals it has posted an average EPS of Rs. 0.73 and an average RoNW of 11.62%. Issue is priced at a P/BV of 1.88 based on its NAV of Rs. 13.27 as on 31.12.17. If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 37 plus against industry average of 27. Thus issue is priced very aggressively. Its listed peers are trading at a P/E of around Aksharchem (14), Kiri Ind. (12), Camex (34) and Meghmani Orga (31) – (as on 05.04.18 closing on BSE). Company is having higher inventory carry over and is mounting year on year that raises concern.

On merchant banker's front, this is the 68th mandate since fiscal 2015-16. Out of last 10 listings (including that of Benara Bearings) 1 opened at a discount and the 8 at a premium ranging from 1.6% to 20% on SME platform and 1 at a premium of  130% on main board on the day of listing.


Conclusion / Investment Strategy

Considering aggressive pricing ofMahickra Chemicals NSE SME IPO, there is no harm in giving it a miss.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Apr 6, 2018

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

Mahickra Chemicals IPO FAQs

  1. 1. Why Mahickra Chemicals IPO?

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

  2. 2. How is Mahickra Chemicals IPO?

    Read the Mahickra Chemicals IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Mahickra Chemicals IPO what should investors do?

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

  4. 4. Is Mahickra Chemicals IPO good?

    Our recommendation for Mahickra Chemicals IPO is to avoid.

  5. 5. Is Mahickra Chemicals IPO worth Investing?

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

  6. 6. When will Mahickra Chemicals IPO allotment status?

    The Mahickra Chemicals IPO allotment status will be available on or around Apr 23, 2018. The allotted shares will be credited in demat account by Apr 25, 2018. Visit Mahickra Chemicals IPO allotment status to check.

  7. 7. When will Mahickra Chemicals IPO list?

    The Mahickra Chemicals IPO will list on Thursday, April 26, 2018, at NSE SME.








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