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Prevest Denpro BSE SME IPO review (May apply)

Review By Dilip Davda on Sep 11, 2021

•    PDL is in the dental diagnosing, treating material business.
•    It marked 60.24% revenue from exports for FY21. 
•    Super performance in pandemic year raises eyebrows.
•    Comparison with MNC listed company as a peer is just an eyewash. 
•    Based on FY21 earnings, the issue appears reasonably priced.

ABOUT COMPANY: 
Prevest Denpro Ltd. (PDL) develops, manufactures and markets a comprehensive portfolio of dental materials for diagnosing, treating and preventing dental conditions as well as improving the aesthetics of the human smile. The breadth and depth of its product offerings address the majority of the dentists' clinical needs for consumable dental materials. PDL's product portfolio covers a wide spectrum of materials for endodontics, prosthodontics, orthodontics, periodontics, restorative dentistry, aesthetic dentistry and laboratory consumables. It supplies its products in over 75 countries through 91 agents and its export revenue contributed around 60.24% for FY21. On the domestic front, it has a network of 53 dealers across 16 states and 2 Union Territories in India. 

ISSUE DETAILS/CAPITAL HISTORY: 
To part finance its plans for purchase of machinery/equipment for proposed additional manufacturing line and R & D unit (Rs. 18.02 cr.) and General corpus fund needs, PDL is coming out with a maiden IPO of 3168000 equity shares of Rs. 10 each via book building route to mobilize Rs. 26.61 cr. at the upper cap. The company has fixed the price band of Rs. 82 - Rs. 84 per share. The issue opens for subscription on September 15, 2021, and will close on September 17, 2021. Minimum application is to be made for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.39% of the post issue paid-up capital of the company. 

The issue is solely lead managed by Hem Securities Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Hem Finlease Pvt. Ltd. will be the market maker for this issue. 

The company's entire equity so far is issued at par. It has also issued bonus shares in the ratio of 30 for 1 in April 2021. The average cost of acquisition of shares by the promoters is Rs. 0.32 and Rs. 0.33 per share. 

Post issue, PDL's current paid-up equity capital of Rs. 8.84 cr. will stand enhanced to Rs. 12.00 cr. At the upper cap, PDL is looking for a market cap of Rs. 100.83 cr.  

FINANCIAL PERFORMANCE: 
For the last three fiscals, PDL has posted turnover/net profits of Rs. 19.77 cr. / Rs. 2.99 cr. (FY19), Rs. 24.56 cr. / Rs. 5.01 cr. (FY20) and Rs. 29.51 cr. / Rs. 7.44 cr. (FY21). Last fiscal's performance is surprising as it is for the pandemic period. 

PDL has posted an average EPS of Rs. 6.67 and an average RoNW of 32.11% for the last three fiscals. The issue is priced at a P/BV of 3.26 based on its NAV of Rs. 25.75 as of March 31, 2021. If we attribute FY21 earnings on fully diluted post issue equity, then the asking price is at a P/E of around 13.55, making this offer reasonably priced. However, with the recent mega bonus issue, its coffers are left with mere reserves. 

DIVIDEND POLICY:
The company has not paid any dividend in the last three fiscals and till the filing of this IPO RHP. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer documents, it has shown 3M India as its listed peer. It is quoting at a P/E of 125.43 (as of September 09, 2021 closing). Its comparison with MNC giant appears to be an eyewash. Even otherwise, PDL does not match the scale of 3M India on any parameters. They are not truly comparable on an apple to apple basis. 

MERCHANT BANKER'S TRACK RECORDS:
This is the 11th mandate from Hem Securities in the last three fiscals (including the ongoing one). Out of the last 10 listings, 1 opened at discount, 3 at par and the rest at premiums ranging from 0.04% to 37.25% on the listings dates. 


Conclusion / Investment Strategy

Based on its super earning in a pandemic IPO pricing appears reasonable, but also raises eyebrows for such earnings as the world economy came to standstill for few months in FY21. The sustainability of higher margins going forward raises concern. Compare with an MNC with no match appears an eyewash for investors to lure them for the investment. Risk seeker/cash surplus investors may consider an investment.

Review By Dilip Davda on Sep 11, 2021

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

Prevest Denpro IPO FAQs

  1. 1. Why Prevest Denpro IPO?

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

  2. 2. How is Prevest Denpro IPO?

    Read the Prevest Denpro IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Prevest Denpro IPO what should investors do?

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

  4. 4. Is Prevest Denpro IPO good?

    Our recommendation for Prevest Denpro IPO is to subscribe for long term.

  5. 5. Is Prevest Denpro IPO worth Investing?

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

  6. 6. When will Prevest Denpro IPO allotment status?

    The Prevest Denpro IPO allotment status will be available on or around Sep 22, 2021. The allotted shares will be credited in demat account by Sep 24, 2021. Visit Prevest Denpro IPO allotment status to check.

  7. 7. When will Prevest Denpro IPO list?

    The Prevest Denpro IPO will list on Monday, September 27, 2021, at BSE SME.