Nakoda Group BSE SME IPO review (May apply)

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Review By Dilip Davda on May 20, 2018

Nakoda Group of Industries Ltd. (NGIL) is engaged in manufacturing of tutti fruity (diced chelory) which is also called “Papaya Preserve” and canned fruit cubes that comes under the category of bakery products. It is also engaged in processing of almonds, trading of sesame seeds, clove, cutpeel murabba, karonda, daalchini and toor dal.

To part finance its working capital and general corpus fund needs, NGIL is coming out with a maiden IPO of 1852000 equity shares of Rs. 10 each at a fixed price of Rs. 35 per share to mobilize Rs. 6.48 crore. Issue opens for subscription on 23.05.18 and will close on 29.05.18. Minimum application is to be made for 4000 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. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Issue constitutes 27.03% of post issue paid up capital of the company. It has raised entire equity at par so far. Cost of acquisition of shares by the promoters is Rs. 10 per share. Post issue, its current paid up equity capital of Rs. 5.00 crore will stand enhanced to Rs. 6.85 crore. Its debt equity ratio as on 31.12.17 is 3.46.

As NGIL took over a business of proprietory concern in July 2016 and merged with it, it has working data of short period. For FY 17 it posted a turnover of Rs. 23.79 cr. with a net profit of Rs. 0.48 cr. For first nine months ended on 31.12.17 of FY18 it earned net profit of Rs. 0.99 cr. on a turnover of Rs. 43.95 cr. As per offer documents, for last three fiscals it has posted an average EPS of Rs. 1.23 and an average RoNW of – (1.87%). Issue is priced at a P/BV of 2.75 based on its NAV of Rs. 12.73 as on 31.12.17 and at a P/BV of 1.85 based on post issue NAV of Rs. 18.91. If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 18. It has no listed peers to compare with.

On merchant banker’s front, this is 62nd mandate from its stable in last three fiscals. Out of last 10 listings all opened with a premium on offer price ranging from 1.59% to 40% on the day of listing.

Conclusion / Investment Strategy

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 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

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