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Sailani Tours BSE SME IPO review (Avoid)

Review By Dilip Davda on Jun 22, 2022

•    STTL is operating in the tourism and hospitality business. 
•    The company is operating in a highly competitive and fragmented segment. 
•    It has posted inconsistent financial data.
•    Based on FY22 annualized earnings, the issue is exorbitantly priced.
•    Investors may skip this costly offer.

ABOUT COMPANY:
Sailani Tours N Travels Ltd. (STTL) is in the travel industry and is one of the recognized holiday brands that cater to the overall travel needs of Indian and International travellers in the state of Kolkata. Its business can be broadly categorized as Leisure Travel, Corporate Travel, Forex and Visa Processing. STTL designs travel packages for both individuals and groups for their domestic and international leisure travel. It also makes travel arrangements for corporate clients to cater to their business meetings, conferences, events and as an incentive for their employees and business partners. 

It provides end-to-end travel solutions including land, air and cruise bookings, hotel bookings, in-transit arrangements, local sightseeing, visa, passport and medical insurance assistance and other destination management services. Besides, the company provides travel-related foreign exchange & payment solutions. It largely operates on the basis of the franchise model. As of the date of filing of this offer document, it had 13 employees on its payroll. It is operating from rented properties. 

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for working capital (Rs. 1.20 cr.) and general corporate purposes (Rs. 0.37 cr.), STTL is coming out with a maiden IPO of 1264000 equity shares of Rs. 10 each at a fixed price of Rs. 15 per share to mobilize Rs. 1.90 cr. The issue opens for subscription on June 27, 2022, and will close on June 30, 2022. Minimum application is to be made for 8000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.87% of the post-issue paid-up capital of the company. STTL is spending Rs. 0.33 cr. for this IPO process.

The issue is solely lead managed by Gretex Corporate Services Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Gretex Share Broking Pvt. Ltd. is the market maker for this IPO. 

After issuing initial equity at par, it converted further equity at a price of Rs. 15 per share in April 2022. The average cost of acquisition of shares by the promoters is Rs. 11.58 and Rs. 14.99 per share.

Post-IPO, STTL's current paid-up equity capital of Rs. 3.44 cr. will stand enhanced to Rs. 4.70 cr. Based on IPO pricing, the company is looking for a market cap of Rs. 7.06 cr. 

FINANCIAL PERFORMANCE: 
On the financial performance front, for the last two fiscals, STTL has posted turnover/net profits of Rs. 4.29 cr. / Rs. 0.05 cr. (FY19), Rs. 1.13 cr. / Rs. 0.03 cr. (FY20). For the nine months of FY22 ended on December 31, 2021, it earned a net profit of Rs. 0.03 cr. on a turnover of Rs. 3.14 cr. It is surprising to note that it has not given full FY22 financial results. 

For the last two fiscals, it has posted an average EPS of Rs. 0.77 and an average RoNW of 3.65% The issue is priced at a P/BV of 1.17 based on its NAV of Rs. 12.77 as of March 31, 2021, and at a P/BV of 1.27 based on its post-IPO NAV of Rs. 11.80 per share. 

If we annualize FY22 earnings and attribute it to fully diluted post IPO equity capital, then the asking price is at a P/E of 187.50 making it a highly-priced offer. 

DIVIDEND POLICY:
The company has not declared any dividend since incorporation. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, STTL has shown International Travel House and Easy Trip Planner as its listed peers. They are currently trading at a P/E of 00 and 72.87 (as of June 22, 2022). However, they are not truly comparable on an apple-to-apple basis. Its comparison with big players is really surprising. 

MERCHANT BANKER'S TRACK RECORDS:
This is the 9th mandate from Gretex Corporate in the last four fiscals (including the ongoing one). Out of the last 8 listings, 2 opened at discount and the rest with premiums ranging from 0.54% to 21.89% on the day of listings. 


Conclusion / Investment Strategy

STTL has presented minuscule operations so far with inconsistency in performance. It is operating in a highly competitive and fragmented segment. A small equity base indicates longer gestation for migration to the main board. Its comparison with big players is an eyewash. There is no harm in skipping this highly-priced issue.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Jun 22, 2022

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

Sailani Tours N Travels IPO FAQs

  1. 1. Why Sailani Tours N Travels IPO?

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

  2. 2. How is Sailani Tours N Travels IPO?

    Read the Sailani Tours N Travels IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Sailani Tours N Travels IPO what should investors do?

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

  4. 4. Is Sailani Tours N Travels IPO good?

    Our recommendation for Sailani Tours N Travels IPO is to avoid.

  5. 5. Is Sailani Tours N Travels IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Sailani Tours N Travels IPO.

  6. 6. When will Sailani Tours N Travels IPO allotment status?

    The Sailani Tours N Travels IPO allotment status will be available on or around Jul 5, 2022. The allotted shares will be credited in demat account by Jul 7, 2022. Visit Sailani Tours N Travels IPO allotment status to check.

  7. 7. When will Sailani Tours N Travels IPO list?

    The Sailani Tours N Travels IPO will list on Friday, July 8, 2022, at BSE SME.