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Manorama Ind BSE SME IPO review (May apply)

Review By Dilip Davda on September 18, 2018

•    Company having virtual monopoly for CBE and Mango butter.
•    Marquee client base on domestic as well as global front.
•    It discontinued trading activgities and not to focus on manufacturing activities only
•    Issue appears fully priced based on super FY18 performance

Manorama Industries Ltd. (MIL) is engaged in manufacturing, processing and supply of exotic and specialty fats & oils like Sal butter, Sal fat, Sal oil, Sal Stearine, Sal olein, Mango butter, Mango fat, Mango oil, Mango Stearine, Kokum butter, Kokum oil, Mowrah fat, and several value added tailor made products. Currently, MIL is among the leading manufacturers of Sal Oils and Stearine globally with an annual production of 3,000-4,000 tonnes. Globally, it is amongst the top 10 manufacturers of Stearine. [Source: CARE Industry Report]. At present MIL is majorly catering to chocolate and cosmetic industry. Its product stearine which is made out of sal or mango seeds is one of the key ingredients in the manufacturing of Cocoa Butter Equivalents (CBE), which has a demand in the Chocolate Industry. Further company’s product olein is generally demanded in cosmetic industry. Its products also serve as a non-palm oil ingredient as there is movement against usage of palm oil in many western countries.

Further pursuant to the enactment of recent notification F. No. Stds /SCSS&H/ Notification (02)/FSSAI-2016 dated May 17th, 2017, from 1st Jan 2018, India has allowed 5% CBE produced from Indian exotic fats to be used in manufacturing of chocolates. The relaxation is not applicable for CBE produced out of imported Shea Stearine. This has been a major positive development for MIL. As the chocolate industry is growing rapidly in India, the demand for CBE should increase rapidly, which can be catered to by CBE produced from Sal, Mango, Kokum, Mahua, Phulwara, & Dhupa ,which are Indian exotic fats and considering MIL has already been dealing in such ingredients and is proposing to set up an integrated facility for manufacturing of CBE at Raipur, the said notification should boost revenue from operations and financial results. The company has also entered into an agreement with one of the leading chocolate manufacturers for supply of CBE for a period of two year from 2018. As on date of the RHP, MIL has an order book to supply CBE worth Rs. 76.80 cr. over a period of two years from April, 2018.

The Company is in the process of setting up an integrated manufacturing facility at Raipur with a capacity of around 11,250 tonnes p.a. of speciality fats and CBE; which shall enable it to carry out the entire manufacturing operations under one roof. With its more than four decades journey in the said business, it has built relationships with large global chocolate/CBE manufacturers like Ferrero (Italy), Ferrero (India), Ferrero (Singapore), Mitsui (Japan), Unigra (Italy), Walter Rau (Germany), Adeka Corporation (Japan), IOI (Malaysia), Fuji Oil (Singapore), etc. who regularly source Sal Stearine and other fats from MIL. The Company has also entered into a supply agreement with The Body Shop International Ltd. (U.K.) for supply of Mango Butter. The Body Shop is one of the leading global cosmetic brands who have pioneered social audits with extremely stringent criteria for sourcing of their products & selection of suppliers. Similarly, it has been supplying oleins & fats which have been used by other leading cosmetic companies like L’oreal, Hallstar (USA), Jedward International INC (USA), Stearinerie Dubois FILS, France, etc. Domestically, it majorly supplies in Maharashtra, Gujarat, etc. and internationally, mainly supply products in countries like Japan, Italy, Malaysia, Indonesia, Singapore, Netherlands, Germany, Sweden, Denmark and UK.

To part finance its plans for  establishing an integrated Greenfield project for manufacturing of CBE / specialty fats and tailormade products at Birkoni, near Raipur, Chhattisgarh, and general corpus fund needs, MIL is coming out with a maiden IPO of 3404400 equity shares of Rs. 10 each via book building issue. It has fixed a price band of Rs. 181-Rs. 188 per share. Company mulls mobilizing Rs. 61.62 cr. to Rs. 64.00 cr. (based on lower and upper price bands). Issue opens for subscription on 21.09.18 and will close on 25.09.18. Minimum application is to be made for 600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue is solely lead managed by Pantomath Capital Advisors Pvt. Ltd. while Link Intime India Pvt. Ltd. is the registrar to the issue.  Issue constitutes 30.59% of the post issue paid up capital of the company. Having issued initial equity at par,it raised further equity in the price range of Rs. 50 to Rs. 198.71 per share between March 2008 and April 2018. It has also issued bonus shares in the ratio of 1 for 2 in March 2011 and 5 for 2 in January 2018. Cipher – Plexus Capital Advisors Private Limited has invested in this company at Rs. 198.71 per share to buy 173779 shares (2.25% of existing equity capital) in April 2018. Average cost of acquisition of shares by the promoters is Rs. 14.81 per share. Post issue MIL’s current paid up equity capital of Rs. 7.72 cr. will stand enhanced to Rs. 11.12 cr.

On performance front, for last four fiscals, MIL has posted turnover/net profits of Rs. 133.44 cr. / Rs. 0.94 cr. (FY15), Rs. 131.69 cr. / Rs. 1.08 cr. (FY16), Rs. 146.38 cr. / Rs. 1.38 cr. (FY17) and Rs. 221.89 cr. / Rs. 10.36 cr. (FY18). Sudden boost in its top and bottom line is raising eyebrows. According to management, boost is due to more trading activities carried during the year, but major margins realization derived from manufacturing activities. It is now giving major thrust on manufacturing activities only and has discontinued trading activities. For last three fiscals, it has posted an average EPS of Rs. 7.72 and an average RoNW of 25.52%  (with super results of FY18). Issue is priced at a P/BV of 5.74 based on its NAV of Rs. 32.75 as on 31.03.18. If we consider FY18 and attribute it on fully diluted equity post issue then asking price is at a P/E of around 20 plus and thus it appears fully priced.

As per offer documents, it has no listed peers to compare with. MIL enjoys virtual monopoly in the business. As per Bloomberg source - Globally only three companies are in the similar business i.e. Fuji Oil, AAK Denmark and Loders Croklaan that are currently trading around 21, 30 and 23 P/E multiples in international markets.

On merchant banker’s front, this is 81st mandate from its stable in last four fiscals. Out of last 10 listings, 1 opened at par and the rest with a premium ranging from 0.5% to 8% on the day of listing.

Conclusion / Investment Strategy

As the issue is fully priced, considering its expansion plans and virtual monopoly status, investors may consider investment for long term.

Review By Dilip Davda on September 18, 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. 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: ).

Manorama Industries IPO FAQs

  1. 1. Why Manorama Industries IPO?

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

  2. 2. How is Manorama Industries IPO?

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

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

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

  4. 4. Is Manorama Industries IPO good?

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

  5. 5. Is Manorama 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 Manorama Industries IPO.

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

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

  7. 7. When will Manorama Industries IPO list?

    The Manorama Industries IPO will list on Thursday, October 4, 2018, at BSE SME.
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