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Retina Paints BSE SME IPO review (Avoid)

Review By Dilip Davda on April 13, 2023

•    RPL is engaged in the decorative paint manufacturing of various grades.
•    Its financial performance so far remains at a minuscule level. 
•    Based on its financial data, the issue is exorbitantly priced. 
•    It is operating in a highly competitive and fragmented segment.
•    There is no harm in skipping this pricey issue. 

Retina Paints Ltd. (RPL) is into manufacturing Decorative Paints like Distempers, Primers, Wall Care Products, Emulsions, etc. and further, sell them to different Distributors. It sources raw materials at present indigenously for the manufacturing of Paints. RPL's water-based paints are used for residential and for commercial buildings. The company has recently introduced tinting machines which comprise a plurality of colourant reservoirs containing a colourant, one or more cleaning fluid supply conduits and one or more dispenser heads for dispensing colourant into a paint container.

The Company works on B2B Business Model, it sells products to dealers and distributors and then they sell to the end customers. It is having exposure to the markets of Telangana, Andhra Pradesh and Odissa, and soon it will be expanding to other states as well. RPL competes with a few of the major players from the Organized Market and a few from the Unorganized Market in the Paint Industry. The company has water-based products in its basket, it is also aiming for oil-based products. Oil-based products are applied to wood, iron, etc. The company recently expanded its capacity and this new plant is already in operation. As of December 2022, RPL had approximately (?) 21 employees on its payroll. 

The company is coming out with a maiden IPO of 3700000 equity shares of Rs. 10 each at a fixed price of Rs. 30 per share to mobilize Rs. 11.10 cr. The issue opens for subscription on April 19, 2023, and will close on April 24, 2023. The minimum application to be made is for 4000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.54% of the post-issue paid-up capital of the company. RPL is spending Rs. 1.00 cr. for this IPO process, and from the net proceeds, it will utilize Rs. 8.00 cr. for working capital and Rs. 2.10 cr. for general corporate purposes.

The issue is solely lead managed by Gretex Corporate Services Ltd. and Bigshare Services Pvt. Ltd. is the registrar of the issue. Gretex group company Gretex Share Broking Pvt. Ltd. is the market maker for the company. 

Having issued initial equity shares at par, the company issued further equity shares at a fixed price of Rs. 30 per share in the month of November 2022. It has also issued bonus shares in the ratio of 21 for 1 in May 2019 and 1 for 1 in January 2023. The average cost of acquisition of shares by the promoters is Rs. 9.11 and Rs. 11.23 per share.   

Post-IPO, RPL's current paid-up equity capital of Rs. 10.24 cr. will stand enhanced to Rs. 13.94 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 41.82 cr. 

On the financial performance front, for the last three fiscals, RPL has posted a turnover/net profit of Rs. 6.81 cr. / Rs. 0.05 cr. (FY20), Rs. 6.86 cr. / Rs. 0.05 cr. (FY21), and Rs. 6.47 cr. / Rs. 0.11 cr. (FY22). The sudden boost in the bottom line on declined profits for FY22 raises eyebrows. For the first eight months of FY23 ended on November 30, 2022, it earned a net profit of Rs. 0.40 cr. on a turnover of Rs. 5.34 cr. is even more surprising. It appears to pave the way for fancy pricing of the IPO, some window dressing is done with a boost in other income. 

For the last three fiscals, RPL has reported an average EPS of Rs. 0.13 and an average RoNW of 5.03%. The issue is priced at a P/BV of 1.70 based on its NAV of Rs. 17.65 as of November 30, 2022, and at a P/BV of 1.86 based on its post-IPO NAV of Rs. 16.15 per share. (There appears to be some mismatch in post-IPO NAV).

If we annualize FY23 super earnings and attribute it to post-IPO fully diluted paid-up capital, then the asking price is at a P/E of 69.77 and based on FY22 earnings, it is at a P/E of 375. Thus the IPO is exorbitantly priced discounting all near-term positives.

According to management, it maintained the top line in the Pandemic and post-pandemic period and with its expansion plans and enhancement in its product portfolio, it hopes to do much better going forward. 

The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy post-listing, based on its financial performance and future prospects. 

As per the offer document, the company has shown Asian Paints and Indigo Paints as their listed peers which is nothing but an eyewash. They are currently trading at a P/E of 71.52 and 43.74 (as of April 13, 2023). However, they are not truly comparable on an apple-to-apple basis and comparison with such bigwigs is really surprising. 

This is the 16th mandate from Gretex Corporate in the last four fiscals (including the ongoing one). Out of the last 10 listings, 1 opened at discount, 1 at par and the rest listed at premiums ranging from 0.47% to 67.71% on the listing date. Thus it has an average track record.

Conclusion / Investment Strategy

The company operates in a highly competitive and fragmented segment with many big players around. The sudden boost in its bottom line for 8M FY23 raises eyebrows and concern over sustainability going forward. Even based on such super earnings, the issue appears aggressively priced while based on its track records so far, the issue appears exorbitantly priced. It has current equity of Rs. 10+ cr. that will rise to around Rs. 14 cr. post IPO, the top line is around Rs. 6+ cr. and wants Rs. 11 cr. from IPO proceeds, isn’t it a big surprise? There is no harm in skipping this pricey issue.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on April 13, 2023

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. My reviews do not cover GMP market and operators game plans. Readers must consult a qualified financial advisor before making any actual investment decisions, based the on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the recent past, SME IPOs drew the attention of investors across the board and lead to seer madness. 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 their own risk. The above information is based on information available as of date coupled with market perceptions. The Author has no plans to invest in this offer.

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.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: ).

Retina Paints IPO FAQs

  1. 1. Why Retina Paints IPO?

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

  2. 2. How is Retina Paints IPO?

    Read the Retina Paints IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Retina Paints IPO what should investors do?

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

  4. 4. Is Retina Paints IPO good?

    Our recommendation for Retina Paints IPO is to avoid.

  5. 5. Is Retina Paints IPO worth Investing?

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

  6. 6. When will Retina Paints IPO allotment status?

    The Retina Paints IPO allotment status will be available on or around April 27, 2023. The allotted shares will be credited in demat account by May 2, 2023. Visit Retina Paints IPO allotment status to check.

  7. 7. When will Retina Paints IPO list?

    The Retina Paints IPO will list on Wednesday, May 3, 2023, at BSE SME.