Raw Edge BSE SME IPO review (Apply at your own risk)

Review By Dilip Davda on Jul 3, 2018

Raw Edge Industrial Solutions Ltd. (REISL) is specialized in organizing the inefficiencies of the industrial raw materials supplies. This specialization is based on research & development, exploration, mining, processing, logistics and IT enabling etc. REISL is playing a role of out sourcing partner for highly organized, technically advance, environment friendly and very cost effective players. The company is able to provide end-to-end solutions under one roof to the industries anywhere in India.

Having foreseen the potential use of Lime products and its demand, REISL initially started trading in Lime Fines, Limestone, Ferrous Sulphate, Quartzite, Dolomite and gradually ventured into Calcium Lime Crushing plant. It mastered in logistical play for procurement and supply of products on the basis of ERP (Enterprise Resource Planning).  Over the periods, the company expanded its Lime processing production capacities to 60000 MT/ annum besides continuing trading of other materials such as Lime Powder, Lime Stones, Dolomite, Quartzite, Calcined Magnesites, Quick Lime, Asetic Acid, Benzene, Butaone, Caustic, Ethyle Acelate, Ethylene Glycole, Hydrogen Paroxide, Menthol, Potasium Carbonate, Toulene.

At present, REISL is into the manufacturing and trading of calcium Lime products and trading into various minerals such as Hydrated Lime, Lime Stones Chips, Dolomite, Quartzite, Plaster of Paris. Though its customers are spreaded over 10 states, but major supply of its products are concentrated in the state of Gujarat and Rajasthan (contributing 91.37 % of total turnover). REISL has lined up tripling of its production capacities.

To part finance its plans for setting up of new manufacturing unit, working capital and general corpus fund needs, REISL is coming out with a maiden IPO of 2291200 equity shares of Rs. 10 each at a fixed price of Rs. 72 per share to mobilize Rs. 16.50 crore. Issue opens for subscription on 05.07.18 and will close on 10.07.18. Minimum application is to be made for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME.  Issue constitutes 27.33% of the post issue paid up capital of the company. Issue is solely lead managed by Guiness Corporate Advisors Pvt. Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Having issued initial equity at par, it raised further equity in the price range of Rs. 45 to Rs. 60 per share. It has also issued bonus shares in the ratio of 7 for 1 in February 2018. Average cost of acquisition of shares by the promoters is Rs. 2.40, Rs. 3.43 and Rs. 4.65 per share. Post issue, REISL’s current paid up equity capital of Rs. 6.70 cr. will stand enhanced to Rs. 8.38 cr.

On performance front, for last four fiscals, REISL has posted turnover/net profits of Rs. 33.50 cr. / Rs. 0.70 cr. (FY14), Rs. 38.27 cr. / Rs. 0.45 cr. (FY15), Rs. 41.34 cr. / Rs. 0.58 cr. (FY16) and Rs. 48.61 cr. / Rs. 0.62 cr. (FY17). For the first 10 months ended on 31.01.18 of FY18 it has earned net profit of Rs. 1.33 cr. on a turnover of Rs. 44.99 cr. Thus for all these periods, while its top line has shown gradual improvements, its bottom line has seen inconsistency. As per management, its current performance is the result of its planed logistical management that has brought in additional margins. For last three fiscals it has posted an average EPS of Rs. 7.21 and an average RoNW of 10.15% (on the basis of pre-bonus equity of Rs. 0.84 cr.)  Issue is priced at a P/BV of 0.80 on the basis of pre-bonus NAV of Rs. 901.27 (as on 31.01.18) and at a P/BV of 3.07 on the basis of post issue NAV of Rs. 23.46. If we annualize latest earnings and attribute it on fully diluted equity post issue then asking price is at a P/E of around 37 plus. As per offer document, it has shown Sanginita Chemicals, India Gelatin and Meghmani Organics as its listed peers that are currently trading at a P/E of around 45, 27 and 9 (as on 03.07.18). Thus issue is priced aggressively.

On merchant banker’s front, this is 26th mandate from its stable in last three fiscals. Out of last 10 listings, 1 opened at discount and the rest opened at a premiums ranging from 2.63% to 20% on the day of listing. (Offer document has a mistake of showing Waa Solar issue price as Rs. 151 against Rs. 161 (page 189).


Conclusion / Investment Strategy

Despite gradual growth in top line, inconsistency in bottom line and aggressive pricing raises concern. Risk savvy cash surplus investors may consider investment at their own risk for long term.

Review By Dilip Davda on Jul 3, 2018

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

Raw Edge Industrial Solutions IPO FAQs

  1. 1. Why Raw Edge Industrial Solutions IPO?

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

  2. 2. How is Raw Edge Industrial Solutions IPO?

    Read the Raw Edge Industrial Solutions IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Raw Edge Industrial Solutions IPO what should investors do?

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

  4. 4. Is Raw Edge Industrial Solutions IPO good?

    Sorry, we didn't rate the Raw Edge Industrial Solutions IPO.

  5. 5. Is Raw Edge Industrial Solutions IPO worth Investing?

    Our lead analyst Mr. Dilip Davda didn't rate the Raw Edge Industrial Solutions IPO.

  6. 6. When will Raw Edge Industrial Solutions IPO allotment status?

    The Raw Edge Industrial Solutions IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit Raw Edge Industrial Solutions IPO allotment status to check.

  7. 7. When will Raw Edge Industrial Solutions IPO list?

    The Raw Edge Industrial Solutions IPO will list on Wednesday, July 18, 2018, at BSE SME.

1 Comments

Dilip Davda
1. Dilip Davda  Jul 5, 2018 17:19
This issue comprises of offer for sale of 610000 equity shares and 1681200 fresh equity issue, thus out of Rs. 16.50 cr. Rs. 4.39 cr. is going to selling shareholders and the balance of Rs. 12.11 crore is only available to the company for its expansion plans.Tripling of capacity will definitely bring more income going forward, but the same is already discounted in the price of the issue.








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