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Precision Metaliks NSE SME IPO review (May apply)

Review By Dilip Davda on Jan 15, 2022

•    PML started as a trader in metals and ventured into manufacturing and related services.
•    It has shown growth in its top and bottom lines since FY19.
•    Spectacular performance for the last 18 months' period raises eyebrows.
•    The issue is fully priced based on its current financial parameters. 

ABOUT COMPANY:
Precision Metaliks Ltd. (PML) that started as a trader in the metals has ventured into the manufacturing of metals since 2019-20 in the SEZ unit. It carries out the manufacturing activities/process on Semi-finished Wheels by rendering value-added services such as cleaning, washing, buffing, polishing, testing and packing.

It also provides high-end design Engineering services, Analysis, Product Development, Prototyping, Tooling Design and various other services such as flow forming, skin cut services etc. As of November 30, 2021, it has pending orders worth Rs. 173.41 cr. As of the same date, it has 159 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its plans for working capital needs (Rs. 16.00 cr.) and general corporate purpose (Rs. 4.43 cr.), PML is coming out with a maiden IPO of 4300000 equity share of Rs. 10 each at a fixed price of Rs. 51 per share to mobilize Rs. 21.93 cr. The issue opens for subscription on January 19, 2022, and will close on January 24, 2022. Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.45% of the post issue paid-up capital of the company. PML is spending around Rs. 1.50 cr. for this IPO process. 

The issue is solely lead managed by First Overseas Capital Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. NNM Securities Pvt. Ltd. is the market maker for the company. 

Having issued initial equity at par, the company issued further equity in the price range of Rs. 95 - Rs. 140 between May 2019 and March 2021. It has also issued bonus shares in the ratio of 39 for 1 in September 2021. The average cost of acquisition of shares by the promoters is Rs. 0.25 and Rs. 3.35 per share. 

Post issue, PML's current paid-up equity capital of Rs. 11.96 cr. (11959066 shares) will stand enhanced to Rs. 16.26 cr. (16259066 shares). Based on the IPO pricing, the company is looking for a market cap of Rs. 82.92 cr. 

FINANCIAL PERFORMANCE: 
On the financial performance front, for the last three fiscals, PML has posted turnover/net profits of Rs. 0.05 cr. / Rs. 0.01 cr. (FY19), Rs. 22.18 cr. / Rs. 0.82 cr. (FY20) and Rs. 49.24 cr. / Rs. 1.49 cr. (FY21). For the first half of FY22 ended on September 30, 2021, the company has earned a net profit of Rs. 2.15 cr. on a turnover of Rs. 48.13 cr. Spectacular performance for the past 18 months raises eyebrows. The sustainability of such margins going forward raises concern.

For the last three fiscals, PML has posted an average EPS of Rs.13.49 and an average RoNW of 7.62%. The issue is priced at a P/BV of 3.48 based on its NAV of Rs. 14.64 as of September 30, 2021, and at a P/BV of 2.13 based on post issue NAV of Rs. 23.99. 

If we annualize FY22 earnings and attribute it to fully diluted post issue equity, then the asking price is at a P/E of around 19.32. The issue is fully priced on its current financial parameters.

COMPARISON WITH LISTED PEERS:
As per offer documents, PML has shown Remsons Ind., Uni Abex Alloy, Investment & Precision as its listed peers. They are currently trading at a P/E of 33.21, 10.24 and 24.37 (as of January 14, 2022). However, they are not truly comparable on an apple-to-apple basis. 

DIVIDEND POLICY:
The company has not declared any dividend in the last three fiscals. It will adopt a prudent dividend policy post listing based on its financial performance and future prospects. 

MERCHANT BANKER'S TRACK RECORD:
This is the 11th mandate from First Overseas in the last four fiscals (including the ongoing one). Out of the last 10 listings, 2 opened at discount, 2 at par and the rest with premiums ranging from 1.4% to 120% on the day of listing. 


Conclusion / Investment Strategy

After starting as a trader in metal, the company ventures into manufacturing and related allied services. It has posted growth in its top and bottom lines, but spectacular performance for the last one and half years raises eyebrows and sustainability of margins raises concern. Based on its financial parameters, the issue is fully priced. Cash surplus/risk seekers may consider an investment with a long term perspective.

Review By Dilip Davda on Jan 15, 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

Precision Metaliks IPO FAQs

  1. 1. Why Precision Metaliks IPO?

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

  2. 2. How is Precision Metaliks IPO?

    Read the Precision Metaliks IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Precision Metaliks IPO what should investors do?

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

  4. 4. Is Precision Metaliks IPO good?

    Our recommendation for Precision Metaliks IPO is to subscribe for long term.

  5. 5. Is Precision Metaliks IPO worth Investing?

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

  6. 6. When will Precision Metaliks IPO allotment status?

    The Precision Metaliks IPO allotment status will be available on or around Jan 28, 2022. The allotted shares will be credited in demat account by Feb 1, 2022. Visit Precision Metaliks IPO allotment status to check.

  7. 7. When will Precision Metaliks IPO list?

    The Precision Metaliks IPO list date is not yet available. The Precision Metaliks IPO is planned to list on Feb 2, 2022, at NSE SME.

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