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Parshva Enterprises BSE SME IPO review (Avoid)

Review By Dilip Davda on Jun 15, 2019


•    PEL is trading in cut and polished diamonds and gold jewellery.
•    This sector is highly competitive and currently not fancied by investors.
•    The issue is priced very aggressively at around 45 P/E.
•    Merchant Banker has an average track record.

ABOUT COMPANY:
Parshva Enterprises Ltd. (PEL) is engaged in the wholesale and trading business of cut and polished diamonds and gold jewellery. The company buys and sells diamonds of different categories depending on fancy colour, size, shape and cut. Among cuts Princess-cut, Round-cut and Heart-cut are some known patterns.  Diamonds prices are based on size and cut evaluations. PEL majorly deals in natural diamonds and sells it in domestic markets only. However, PEL primarily sells gold jewellery such as Chains, Bangles, Necklace, Pendant, Bracelet, Earrings etc. It is also investing in real estate properties in Gujarat and Maharashtra with a focus on the middle and higher end of markets for trading gains.

ISSUE DETAILS/CAPITAL STRUCTURE:
To part finance its working capital (Rs. 3.45 cr.) needs, PEL is coming out with a maiden IPO of 810000 equity shares of Rs. 10 each at a fixed price of Rs. 45 per share to mobilize Rs. 3.65 crore. The issue opens for subscription on 19.06.19 and will close on 21.06.19. 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 26.91% of the post issue paid up capital of the company. PEL is spending Rs. 0.20 cr. for this issue.

The issue is solely lead managed by Inventure Merchant Banker Services Pvt. Ltd. while Bigshare Services Pvt. Ltd. is the registrar to the issue.  Sernet Financial Services Pvt. Ltd. is acting as the market maker for this issue. Having raised initial equity at par, it raised further equity at a price of Rs. 45 per share in March 2019. The average cost of acquisition of shares by the promoters is Rs. 9.92 per share.

Post issue, PEL's current paid up equity capital of Rs. 2.20 cr. will stand enhanced to Rs. 3.01 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, PEL has just 21 months working data. For FY18 from 27.07.17 to 31.03.18, it posted a turnover of Rs.4.77 Cr. with a net profit of Rs.0.04 Cr. and for full FY19 it has earned a net profit of Rs. 0.30 cr. on a turnover of Rs. 7.13 cr.

For the last 21 months, as per average calculations, PEL has posted an average EPS of Rs. 1.09 and an average RoNW of 6.46%. The issue is priced at a  P/BV of 3.09 on the basis of its NAV of Rs. 14.55 as on 31.03.19 and at a P/BV of 1.98 on the basis of post issue NAV of Rs. 22.55. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of around 45 against the industry average of 43

COMPARISION WITH LISTED PEERS:
As per offer documents, it has shown Narbada Gems, Lypsa Gems, Goldiam Intl and Swarnasarita Gems as its listed peers that are currently trading at a P/Es of around  39, 74, 15 and 5 (as on 14.06.19). However, they are strictly not comparable on an apple to apple basis.

MERCHANT BANKER'S TRACK RECORDS:
On merchant banker's front, this is the 7th mandate from its stable in last three fiscals. Out of last 6 listings, 1 opened at par, 1 at discount and the rest with premiums ranging from 0.15% to 20% on the day of listings.


Conclusion / Investment Strategy

PEL has just 21 months working records. The issue is priced very aggressively. Merchant Banker has an average track record. PEL operates in a highly competitive segment. Its current issue size may take a longer time for migration to the main board. Considering all these aspects, investors may skip this issue.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Jun 15, 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

Parshva Enterprises IPO FAQs

  1. 1. Why Parshva Enterprises IPO?

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

  2. 2. How is Parshva Enterprises IPO?

    Read the Parshva Enterprises IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Parshva Enterprises IPO what should investors do?

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

  4. 4. Is Parshva Enterprises IPO good?

    Our recommendation for Parshva Enterprises IPO is to avoid.

  5. 5. Is Parshva Enterprises IPO worth Investing?

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

  6. 6. When will Parshva Enterprises IPO allotment status?

    The Parshva Enterprises IPO allotment status will be available on or around Jun 27, 2019. The allotted shares will be credited in demat account by Jun 28, 2019. Visit Parshva Enterprises IPO allotment status to check.

  7. 7. When will Parshva Enterprises IPO list?

    The Parshva Enterprises IPO will list on Monday, July 1, 2019, at BSE SME.