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Penta Gold NSE SME IPO review (Avoid)

Review By Dilip Davda on Aug 30, 2017

Penta Gold Ltd. (PGL) is a retailer, wholesaler and exporter of gold jewellery. It has a retail outlet in Mumbai. PGL export products (gold jewellery studded with diamond) to overseas buyers and also sells to wholesalers domestically. The company primarily sells gold jewellery i.e. Chains, Rings, Bangles, Necklace, Mangalsutra, Bracelet, Earrings and other jewellery studded or non-studded with pearls, diamonds, American diamonds and other precious stones. Further, it also has product line of antique and kundan Jewellery and variety of Italian jewellery products which is famous for its machine designs and light weighted jewellery. PGL majorly procures required gold from various banks and also procures gold and precious stones from local markets.

To part finance its additional working capital and general corporate funds needs, PGL is coming out with a maiden IPO of 3268000 equity shares of face value of Rs. 10 each at a fixed price of Rs. 35 per equity share to mobilize Rs. 11.44 crore. Issue opens for subscription on 04.09.17 and will close on 06.09.17. Minimum application is to be made for 4000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Issue is solely lead managed by Inventure Merchant Banker Services Pvt Ltd and Karvy Computershare Pvt. Ltd. is the registrar to the issue. The issue will constitute 26.37% of the post issue paid up equity share capital of the company. Having issued initial equity at par, it raised further funds in a price range of Rs.40 to Rs. 50 between March 2014 and March 2016. It also issued bonus shares in the ratio of 1 for 1 in December 2016. Post issue its current paid up equity capital of Rs. 9.13 crore will stand enhanced to Rs.12.39 crore.

On performance front, for last four fiscals PGL has posted turnover/net profits of Rs. 838.26 cr. / Rs. 1.38 cr. (FY14), , Rs. 250.02 cr. / Rs. 1.58 cr. (FY15), Rs. 244.92 cr. / Rs. 1.78 cr. (FY16) and Rs. 237.58 cr. / Rs. 1.69 cr. (FY17). Its working for FY 14 posted gigantic top line with no commensurate rise in bottom line. For last three fiscals it has posted an average EPS of Rs. 1.92 and RoNW of 11.96%. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of 25 plus and at a P/BV of 2 plus. Peers are trading in the range of 12 to 33 P/Es. Thus issue appears to have been priced aggressively.

On merchant banker's front, this is the 2nd mandate from its stable and last listings although marked opening at a premium, it closed at a discount to offer price on the listing date.

Conclusion: Considering track record and aggressive pricing, there is no harm in giving this IPO a miss.


Conclusion / Investment Strategy

Considering track record and aggressive pricing of Penta Gold NSE SME IPO, there is no harm in giving this IPO a miss.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Aug 30, 2017

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

Penta Gold Limited IPO FAQs

  1. 1. Why Penta Gold Limited IPO?

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

  2. 2. How is Penta Gold Limited IPO?

    Read the Penta Gold Limited IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Penta Gold Limited IPO what should investors do?

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

  4. 4. Is Penta Gold Limited IPO good?

    Our recommendation for Penta Gold Limited IPO is to avoid.

  5. 5. Is Penta Gold Limited IPO worth Investing?

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

  6. 6. When will Penta Gold Limited IPO allotment status?

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

  7. 7. When will Penta Gold Limited IPO list?

    The Penta Gold Limited IPO list date is not yet available. The Penta Gold Limited IPO is planned to list on [.], at NSE SME.

1 Comments

1. Krishnachandra Pujari  Sep 3, 2017 1:01:45 AM
Do not subscribe to this IPO. The profit margins seem to be ridiculous. Further the promoter has defrauded a couple of banks when he was a Director at his previous Company Royal Refinery and his personal integrity is dubious. The Jewellery business and their exports are all too dummy companies in UAE and HongKong and are not genuine. Highly recommended that this IPO be avoided and save your hard earned money from being lost.