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Northern Spirits BSE SME IPO review (May apply)

Review By Dilip Davda on Mar 16, 2019

•    NSL is importer and distributor of leading international brand spirits.
•    It merged United Wines with it in April 2018 and thus added IMFL in its distribution basket.
•    Based on current earnings, the issue appears fully priced, but listed companies in this sector trades in the range of 13 to 62 P/Es.
•    Considering prospects for this segment, long term investment may be considered.

ABOUT COMPANY:
Northern Spirits Ltd. (NSL) started its operations in 2012 as Importer & Distributor of fine Alcoholic Beverages and is focused in imports of leading international brands such as William Grants ( Glenfiddich Single Malt, Grants Whisky, Monkey Shoulder Whisky, Balvenie Single Malt, Hendricks Gin), Bacardi Global ( Grey Goose Vodka, Bombay Sapphire Gin, Dewar's Whisky, Martini Vermouth), Shepherd Neame Beer, Amigos Beer, Carlo Rossi California Wines, Tomich Australian Wines, Cooper's Australian Beer, West Cork Irish Whiskey, Two Tree Gin, Reddot Wheat Beer, Aqua Riva Mexican Tequila & Organika Russian Vodka and are distributing the same in Northern Region – Delhi, North East, West Bengal and as a strategic move decided to integrate the business for better corporate governance and Compliance. In April 2018 it merged United Wines with it and has thus become a full-fledged distributor of IMFL.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its working capital and general corpus fund needs, NSL is coming out with a maiden IPO of 4302000 equity shares of Rs. 10 each at a fixed price of Rs.43 per share to mobilize Rs.18.50 Cr. Issue opens for subscription on 22.03.19 and will close on 27.03.19. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue constitutes 26.80% of post issue paid up capital of the company.

The issue is solely lead managed by Finshore Management Services Ltd. while Cameo Corporate Services Ltd. is the registrar to the issue. Airan Finstocks Pvt. Ltd. is acting as a market maker for this issue. Having issued initial equity at par, NSL raised further equity in the price range of Rs. 38 to Rs. 53 between June 2.15 and July 2018. It has also issued bonus shares in the ratio of 1 share for every 1 share held in September 2018. The average cost of acquisition of shares by the promoters is Rs. 0.71, Rs. 4.38 and Rs.49.47 per share. Post issue NSL's current paid up equity capital of Rs. 11.75 cr. will stand enhanced to Rs. 16.05 cr.

FINANCIAL PERFORMANCE:
On the performance front, for the last three fiscals, NSL has posted turnover/net profits (loss) of Rs. 3.40 cr. / Rs. –(0.51)  cr. (FY16), Rs. 17.36 cr. / Rs. 0.53 cr. (FY17) and Rs. 25.89 cr. / Rs. 1.01 cr. (FY18). For the first half of the current fiscal (FY19) is has earned a net profit of Rs. 2.75 cr. on a turnover of Rs. 48.66 cr. For last six fiscals, NSL has posted an average EPS of Rs.10.94 and an average RoNW of 17.95% (on a pre-bonus basis for FY13-14 to FY17-18 and H1 on FY19 on non-annualize basis). The issue is priced at a P/BV of 1.50 on the basis of its NAV of Rs. 28.66 as on 30.09.18 and at a P/BV of 1.36 on the basis of post issue NAV of Rs. 31.70.

If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 12.54.

COMPARE WITH LISTED PEERS:
As per offer documents, NSL has no listed peers to compare with. Thus NSL enjoys first mover tag in this segment. However, companies under this sector are currently trading at a P/Es of ranging between 13 and 62 (as on 15.03.19). This bandwagon included GM Breweries, Radico Khaitan and United Spirits.)

MERCHANT BANKER'S TRACK RECORD:
On merchant banker's front, this is the 10th mandate from its stable in last three fiscals. Out of 9 listings so far, 3 opened at discount, 1 at par (Mahip) and the rest with premiums ranging from 0.02% to 20.67% on the day of listings.


Conclusion / Investment Strategy


On the basis of the current financial performance, the issue appears fully priced. Looking at rising trends in the top and bottom line, it is poised for bright prospects ahead. Investors may consider an investment for the long term.

Review By Dilip Davda on Mar 16, 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

Northern Spirits IPO FAQs

  1. 1. Why Northern Spirits IPO?

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

  2. 2. How is Northern Spirits IPO?

    Read the Northern Spirits IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Northern Spirits IPO what should investors do?

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

  4. 4. Is Northern Spirits IPO good?

    Our recommendation for Northern Spirits IPO is to subscribe for long term.

  5. 5. Is Northern Spirits IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Northern Spirits IPO.

  6. 6. When will Northern Spirits IPO allotment status?

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

  7. 7. When will Northern Spirits IPO list?

    The Northern Spirits IPO will list on Thursday, April 4, 2019, at BSE SME.