Misquita Engineering BSE SME IPO review (Avoid)

Review By Dilip Davda on Sep 19, 2019


•    MEL is engaged in the manufacturing of front-loading washers. A highly competitive field.
•    Based on average financial data, asking price is aggressive.
•    Peers list is highly surprising as it includes Whirlpool, Voltas and Blue Star.
•    Merchant Banker has average track records.
 
ABOUT COMPANY:
Misquita Engineering Ltd. (MEL) is engaged in the manufacturing of the front-loading washers. The Company faces competition from established Indian and International Establishments. It intends to continue competing vigorously to capture more market share
 
ISSUE DETAILS/CAPITAL HISTORY:
To part finance its payment/repayment of certain debts (Rs. 0.25 cr.) and working capital needs (Rs. 0.50 cr.), MEL is coming out with a maiden IPO of 716000 equity shares of Rs. 10 each at a fixed price of Rs. 27 per share to mobilize Rs. 1.93 cr. It comprises fresh equity issue of 444000 shares (Rs. 1.20 cr.) and offer for sale of 272000 shares (Rs. 0.73 cr.).  The issue opens for subscription on 23.09.19 and will close on 25.09.19. Minimum application is to be made for 4000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue constitutes 26.58% of the post issue paid-up capital of the company.
 
The issue is solely lead managed by Gretex Corporate Services Pvt. Ltd. while Bigshare Services Pvt. Ltd. is the registrar to the issue. Gretex Share Broking Pvt. Ltd. is the market maker for this issue. Having issued initial equity at par, it converted further equity at a price of Rs. 13.50 per share in the month of March 2017 and has also issued bonus shares in the ratio of 19 for 1 in February 2017.MEL is spending Rs. 0.45 cr. to mobilize the issue proceeds.
 
The average cost of acquisition of shares by the promoters is Rs. 0.50 and Rs. 10.37 per share.
 
Post issue, MEL's current paid-up equity capital of Rs. 2.25 cr. will stand enhanced to Rs. 2.69
cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, MEL has posted turnover/net profits of Rs. 5.77 cr. / Rs. 0.16 cr. (FY17), Rs. 6.77 cr. / Rs. 0.25 cr. (FY18) and Rs. 7.61 cr. / Rs. 0.42 cr. (FY19). For the last three fiscals, it has posted an average EPS of Rs. 1.57 and an average RoNW of 8.76% Issue is priced at a P/BV of 1.58 based on its NAV of Rs. 17.08 as on 31.03.19 and at a P/BV of 1.44 based on post issue NAV of Rs. 18.71. If we consider FY19 earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 17.3. Thus the issue is aggressively priced.
COMPARISION WITH LISTED PEERS:
As per offer documents, MEL has shown Whirlpool, Voltas and Blue Star as its listed peers. They are not at all strictly comparable on an apple to apple basis. This list of peers is really surprising. Currently, these peers are trading at a P/Es of around 49, 42 and 47 (as on 19.09.19 closing).
 
MERCHANT BANKER'S TRACK RECORDS:
On merchant banker's front, this is the 18th mandate from its stable in last four fiscals (including the ongoing). Out of last 10 listings, 1 opened at par and the rest opened at premiums of 1.32 to 8% on the day of listings. Thu it has average track records.


Conclusion / Investment Strategy

Based on average financial data, the issue is priced aggressively. MEL operates in a highly competitive field that may bring pressure on margins going forward. Company's tiny equity will take a longer duration for migration to the mainboard. There is no harm in giving it a miss

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Sep 19, 2019

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

Misquita IPO FAQs

  1. 1. Why Misquita IPO?

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

  2. 2. How is Misquita IPO?

    Read the Misquita IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Misquita IPO what should investors do?

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

  4. 4. Is Misquita IPO good?

    Our recommendation for Misquita IPO is to avoid.

  5. 5. Is Misquita IPO worth Investing?

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

  6. 6. When will Misquita IPO allotment status?

    The Misquita IPO allotment status will be available on or around Sep 30, 2019. The allotted shares will be credited in demat account by Oct 1, 2019. Visit Misquita IPO allotment status to check.

  7. 7. When will Misquita IPO list?

    The Misquita IPO will list on Friday, October 4, 2019, at BSE SME.

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