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Nanavati Ventures BSE SME IPO review (Avoid)

Review By Dilip Davda on Apr 19, 2022

•    NVL is in the business of diamonds trading in the Gujarat region. 
•    Its financial performance does not match the asking price.
•    It is operating in a highly competitive and fragmented segment. 
•    Small equity base post IPO indicates a longer gestation period for migration to the mainboard.
•    Stay away from this pricy offer. 

PREFACE:
The company filed its draft offer documents on 16.04.21 and is now entering the market with its final prospectus dated 16.04.22, thus it is seeing the light of the day after one year. 

ABOUT COMPANY:
Nanavati Ventures Ltd. (NVL) is engaged in the trading of diamonds majorly in Surat, Gujarat. Its operations include sourcing polished and uncut diamonds from primary and secondary source suppliers in the domestic market and the sale of diamonds to the retail and wholesale operations in Gujarat. The company primarily sells diamonds to a customer base spread across domestic markets that includes various jewellery manufacturers, large department store chains, retail stores and wholesalers.

It has independent sales and distribution networks for products. A substantial majority of cut and polished diamonds are sold to diamond wholesalers and jewellery manufacturers in the domestic markets. As of the date of filing of the final prospectus, NVL has 7 employees on its payroll including directors.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for working capital (Rs. 1.73 cr.) and general corporate purposes (Rs. 0.25 cr.), NVL is coming out with a maiden IPO of 436000 equity shares of R. 10 each at a fixed price of Rs. 50 per share to mobilize Rs. 2.18 cr. The issue opens for subscription on April 25, 2022, and will close on April 27, 2022. The minimum application to be made is for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.49% of the post issue paid-up capital of the company. NVL is spending Rs. 0.20 cr. for this IPO process. 

The issue is solely lead managed by First Overseas Capital Ltd. and KFin Technologies Ltd. is the registrar to the issue. Nikunj Stock Brokers Ltd. is the market maker for this company. 

Having issued initial equity shares at par, the company issued further equity shares at a fixed price of Rs. 50 per share between April 2020 and May 2020. The average cost of acquisition of shares by the promoters is Rs. NIL and Rs. 49.63 per share. 

Post-IPO, NVL's current paid-up equity capital of Rs. 1.21 cr. will stand enhanced to Rs. 1.65 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 8.23 cr. 

FINANCIAL PERFORMANCE: 
On the financial performance front, for the last three fiscals, NVL has posted revenue/net profits of Rs. 0.56 cr. / Rs. 0.0003 cr. (FY19), Rs. 5.95 cr. / Rs. 0.05 cr. (FY20) and Rs. 11.32 cr. / Rs. 0.12 cr. (FY21). For the first nine months of FY22 ended on December 31, 2021, it has earned a net profit of Rs. 0.10 cr. on total revenue of Rs. 10.50 cr. 

For the last three fiscals, NVL has posted an average of Rs. 139.92 (see pages 60 and 61 of the offer document) and an average RoNW of 199.79%. Thus, there appears to be some mismatch in presenting these data. Even NAV is also shown with such mismatched data. 

As per the offer document, NVL's NAV as of December 31, 2021, stood at Rs. 51.82 (not annualized) and its post-IPO NAV will be Rs. 42.02 and on both these counts, the P/BV stands at 0.96 and 1.19 respectively.

If we annualize FY22 earnings and attribute it to post IPO fully diluted equity capital, then the asking price is at a P/E of 61.73, thus the issue is exorbitantly priced. 

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer documents. It will adopt a prudent dividend policy post listing based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS: 
As per the offer document, NVL has shown Narbada Gems and Tribhovandas Bhimji Zaveri as its listed peers. They are currently trading at a P/E of 25.38 and 20.46 (as of April 2022). However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKER'S TRACK RECORDS:
This is the 12TH mandate from First Overseas in the last xxx fiscal years (including the ongoing one). Out of the last 10 listings, 1 at discount, 2 opened at par and the rest with premiums ranging from 1.40% to 120.00% on the day of listings. 


Conclusion / Investment Strategy

NVL is operating in a highly competitive and fragmented segment of diamond trading. Its financial data is not matching the asking price. Small equity base post IPO indicates longer gestation for migration to the mainboard. Investors should stay away from this pricy issue.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Apr 19, 2022

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

Nanavati Ventures IPO FAQs

  1. 1. Why Nanavati Ventures IPO?

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

  2. 2. How is Nanavati Ventures IPO?

    Read the Nanavati Ventures IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Nanavati Ventures IPO what should investors do?

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

  4. 4. Is Nanavati Ventures IPO good?

    Our recommendation for Nanavati Ventures IPO is to avoid.

  5. 5. Is Nanavati Ventures IPO worth Investing?

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

  6. 6. When will Nanavati Ventures IPO allotment status?

    The Nanavati Ventures IPO allotment status will be available on or around May 2, 2022. The allotted shares will be credited in demat account by May 5, 2022. Visit Nanavati Ventures IPO allotment status to check.

  7. 7. When will Nanavati Ventures IPO list?

    The Nanavati Ventures IPO will list on Friday, May 6, 2022, at BSE SME.

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