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Roni Households BSE SME IPO review (Avoid)

Review By Dilip Davda on Nov 13, 2018

•    RHL incorporated in October 2017 and has just 11 months financial data.
•    Based on financial data, asking price is exorbitant.
•    Money is being raised to repay loans from promoters.
•    LM has average track record.

ABOUT COMPANY:
Roni Households Ltd. (RHL) that was incorporated on 9th October 2017 is currently trading in plastic granules and plastic household products which include tub, buckets, ghamela etc. It intends to further expand its business by manufacturing plastic products for household use. RHL has taken a land on lease in MIDC, Jalgaon, for setting up the manufacturing unit. Trial manufacturing process for small part of company’s proposed capacity has recently commenced. It took over promoter’s proprietorship concern Roni Enterprise in April 2018.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its plans for repayment of loans from promoters (Rs. 1.16 cr.), working capital and general corpus fund needs, RHL is coming out with a maiden IPO of 1500000 equity shares of Rs. 10 each at a fixed price of Rs. 20 per share to mobilize Rs. 3.00 cr. Issue opens for subscription on 19.11.2018 and will close on 22.11.2018. Minimum application is to be made for 6000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue is solely lead managed by Aryaman Financial Services Ltd. while Bigshare Services Pvt. Ltd. is the registrar to the issue. Issue constitutes 34.59% of the post issue paid up capital of the company.

Having raised initial equity at par, it raised further equity at a price of Rs. 20 per share in June 2018 by way of rights issue. Average cost of acquisition by the promoters is Rs. 13.43 and Rs. 14.61 per share. Post issue its current paid up equity capital of Rs. 2.84 cr. will stand enhanced to Rs. 4.34 cr.

FINANCIAL PERFORMANCE:
On financial performance front, since it got incorporated in October 2017, it has just six months working for FY18 wherein it has posted turnover of Rs. 4.30 cr. with a net profit of Rs. 0.08 cr. For first five months of FY 19 (i.e. for the period ended on 31.08.18) it has earned net profit of Rs. 0.02 cr. on a turnover of Rs. 0.74 cr. For the periods ended on 31.03.18 and 31.08.18 it has posted an EPS of Rs. 0.89 and Rs. 0.07 respectively (on none-annualized basis). For the fiscal ended 31.03.18 it posted RoNW of 13.26%. Issue is priced at a P/BV of 1.41 based on its NAV of Rs. 14.21 and at a P/BV of 1.23 on the basis of post issue NAV of Rs. 16.21. If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 181 against industry average of 24 making it exorbitantly priced issue.

COMPARE WITH LISTED PEERS:
As per offer documents, it has no listed peers to compare with.

LM’S TRACK RECORDS:
On merchant banker’s front, this is the 41st mandate from its stable in last four fiscals. Out of last 10 listings, one opened at par and the rest with a premium ranging from 0.25% to 6% on the day of listing. Thus it has an average track record.


Conclusion / Investment Strategy

Company’s financial track record is not for 12 months so far as it was incorporated only in October 2017. Asking price is exorbitant based on financial data. There is no harm in giving this highly priced issue a miss.

Review By Dilip Davda on Nov 13, 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 prior to making any actual investment decisions, based on information published here. With entry barriers, SEBI wants only well informed investors to participate is such offers. With crazy recent listings, SME IPOs have started drawing attention of investors across the board. However, as SME issues have entry barriers and continued low preference from broking community, any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on information available as on date coupled with market perceptions. Author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

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

The Roni Households IPO Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered IPO Analysts tells you if Roni Households IPO worth investing. The Roni Households IPO Note sets the IPO expectations in systematic way which tells you if Roni Households IPO good to buy (good or bad / yes or no). The IPO Forecast tells you weather to invest in Roni Households IPO by providing IPO recommendations i.e. subscribe, avoid and neutral.


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