Roopshri Resorts BSE SME IPO review (Avoid)

Review By Dilip Davda on Mar 16, 2019

•    RRL does not own any asset, It just operates the hotel on leave and license basis.
•    Current working is not encouraging and sudden growth in top and bottom line for FY18 and FY19 – seven months raises concern.
•    The issue is priced aggressively.
•    LM's have poor/average track records.   

ABOUT COMPANY:
Roopshri Resorts Ltd. (RRL) is a hospitality company which is currently operating "Hotel Alexander" at Matheran, which is a popular hill station in Maharashtra. Hotel Alexander is one of the oldest hotel properties in Matheran and has been in existence operating under this brand for over 3 decades. The property is located in a secluded hill side and is an ideal for getting away from the city's hustle and bustle. The Hotel is around 3 hours by road from Mumbai and around 2 hours from Pune, both of which are the major customer segment of the Hotel.

The company has been operating as a service provider for this Hotel over the years and thereafter it has recently taken the hotel property on leave and license from its owner. The Hotel had not been operating to full capacity due to the poor condition of the hotel facilities and hence RRL shall be conducting restoration and repairs work and shall be making the Hotel fully operational and increase its scale of operations.

The Hotel comprises of 13 private cottage rooms and 12 executive rooms, of which only 4 private cottage rooms are in operational condition. Further, the hotel is currently only offering lodging facilities. The look and feel of the property are of "heritage living with nature" and does not require large amounts of investment w.r.t state of the art interiors etc. This makes this a value for money proposition.

The company does not own any real estate. The Hotel Property is taken on leave and license. There is no material outflow in the form of rentals or license fees and hence it makes operating cash flow stress free. RRL has currently 11 employees including two executive directors and 3 non-executive directors.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its plans for repayment of loans and repairs and restoration of Hotel Alexander at Matheran and general corpus fund needs, RRL is coming out with a maiden IPO of 1800000 equity shares of Rs. 10 each at a fixed price of Rs. 20 per share to mobilize Rs. 3.60 crore. The issue opens for subscription on 19.03.19 and will close on 22.03.19. Minimum application is to be made for 6000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME.

The issue is jointly lead managed by BCB Brokerage Pvt. Ltd. and Aryaman Financial Services Ltd. Bigshare Services Pvt. Ltd. is the registrar to the issue and BCB Brokerage Pvt. Ltd. is acting as market maker as well. Issue constitutes 37.42% of the post issue paid up capital of the company.  Having raised initial equity at par, RRL has issued further equity at a price of Rs. 20 per share in October 2018. The average cost of acquisition of shares by the promoters is Rs. 13.33 per share. Post issue RRL's current paid up equity capital of Rs. 3.01 cr. will stand enhanced to Rs.4.81 Cr.

FINANCIAL PERFORMANCE:
On financial performance front, for last three fiscals, RRL has posted turnover/net profits of Rs. 0.37 cr. / Rs. 0.02 cr. (FY16), Rs. 0.41 cr. / Rs. 0.02 cr. (FY17) and Rs. 1.43 cr. / Rs. 0.10 cr. (FY18).

For the first seven months ended on 31.10.18 of FY19, it has earned a net profit of Rs. 0.08 cr. on a turnover of Rs. 1.94 cr. The quantum jump in the top and bottom line for FY18 and FY19 first seven months raises concern. For the last three fiscals, RRL has posted an average EPS of Rs. 0.63 and RoNW of 5.70%. The issue is priced at a P/BV of 1.50 based on its NAV of Rs. 13.33 as on 31.10.18 and at a P/BV of 1.26 based on post issue NAV of Rs. 15.83.

If we annualize latest earnings and attribute it on fully diluted post issue equity, then asking price is at a P/E of around 69 against the industry average of 62. Thus the issue is priced exorbitantly.

COMPARE WITH LISTED PEERS:
As per offer documents, RRL has shown The Byke Hospitality, Aruna Hotels and Woodsvilla as its listed peers that are currently trading at a P/Es of around 6, NA and NA (as on15.03.19). However, they are not strictly comparable.

MERCHANT BANKER'S TRACK RECORDS:
On merchant banker's front, this is the 2nd mandate from BCB Brokerages in last three fiscals. The only listing of Escorp Asset was opened at par with offer price on the day of listing.

From Aryaman Financial, this is the 41st mandate in last three fiscals. Out of last 10 listings, 1 opened at discount to offer price and the rest 9 opened with a premium ranging from 0.02% to 0.08% on the day of listing.

Thus both lead managers have poor/average track records.


Conclusion / Investment Strategy

The issue is priced exorbitantly. Management claims this business model as the asset-light model and does not own any property. There is no harm in giving this issue a miss.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Mar 16, 2019

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

Roopshri Resorts IPO FAQs

  1. 1. Why Roopshri Resorts IPO?

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

  2. 2. How is Roopshri Resorts IPO?

    Read the Roopshri Resorts IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Roopshri Resorts IPO what should investors do?

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

  4. 4. Is Roopshri Resorts IPO good?

    Our recommendation for Roopshri Resorts IPO is to avoid.

  5. 5. Is Roopshri Resorts IPO worth Investing?

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

  6. 6. When will Roopshri Resorts IPO allotment status?

    The Roopshri Resorts IPO allotment status will be available on or around Mar 27, 2019. The allotted shares will be credited in demat account by Mar 29, 2019. Visit Roopshri Resorts IPO allotment status to check.

  7. 7. When will Roopshri Resorts IPO list?

    The Roopshri Resorts IPO will list on Monday, April 1, 2019, at BSE SME.








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