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Saketh Exim NSE SME IPO review (Avoid)

Review By Dilip Davda on Jul 27, 2018

* Saketh has manufacturing and trading activities

* Diluting around 27.23% equity at a price of Rs. 69 per share
 
* Asking price is at around 32 P/E

* No harm in avoiding this exorbitantly priced IPO.

About the company:
Saketh Exim Ltd. (SEL) is engaged in the manufacturing and fabrication of various steel products which are meant for its application in pipe support system, HVAC system, Anti vibration system and equipments for industrial, commercial, utility and OEM installations. Product portfolio includes G.I. Nuts, various types of bolts, clamps, hangers, all types of bathroom pipes, fittings, bathroom accessories, sanitary wares etc. For the fiscal 2017-18, Company’s revenue from manufacturing activities was 61.22% and from trading activities was 38.78%. SEL trades in textile products. Its all three manufacturing units are located at Vashi, Navi Mumbai.

Issue details:
To part finance its working capital and general corpus fund needs,  SEL is coming out with a maiden IPO of 1368000 equity shares of Rs. 10 each at a fixed price of Rs. 69 per share to mobilize Rs. 9.44 crore. Issue comprises of offer for sale of 245000 equity shares and fresh issue of 1123000 equity shares. It opens for subscription on 01.08.18 and will close on 03.08.18. Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Issue constitutes 27.23% of the post issue paid up capital of the company. Issue is solely lead managed by Aryaman Financial Services Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue.

Capital history:
Having issued initial equity at par, SEL raised further equity at a price of Rs. 20.83 and Rs. 26 per share. It has also issued bonus shares in the ratio of 1 for 2 in March 2018. Average cost of acquisition of shares by the promoters is Rs. 1.40, Rs. 4.84, Rs. 6.33 and Rs. 17.61 per share. Post issue, SEL’s current paid up equity capital of Rs. 3.90 cr. will stand enhanced to Rs. 5.02 cr.

Financial performance:
On financial performance front, for last four fiscals, SEL has posted turnover/net profits of Rs. 37.49 cr. / Rs. 0.40 cr. (FY15), Rs. 46.72 cr. /Rs. 0.77. Cr. (FY16), Rs. 51.40 cr. /Rs. 0.96 cr. (FY17) and Rs. 62.00 cr. /Rs. 1.07 cr. (FY18). Thus there has been gradual growth in top and bottom lines. For last three fiscals, it has posted an average EPS of Rs. 2.87 and an average RoNW of 16.93%. Issue is priced at a P/BV of 3.67 on the basis of its NAV of Rs. 18.78 as on 31.03.18 and at a P/BV of 2.26 on the basis of post issue NAV of Rs. 30.53. Its debt ratio is around 2.63. If we attribute latest earnings on the post issue equity then asking price is at a P/E of around 32 against industry composite of 13.90. Thus it is priced very aggressively. As per offer documents, it has no listed peers to compare with.

Lead manager track record:
On merchant banker’s front, as per offer document, this is the 36th mandate from its stable in last four fiscals. Out of last 10 listings, 2 opened at discount, 2 around par and the rest with a premium ranging from 0.75% to 6% on the day of listing. Thus it has poor track record.


Conclusion / Investment Strategy

Although company has been reporting gradual growth in its top and bottom lines for last five fiscals, very aggressive pricing is the major concern. There is no harm in giving this exorbitantly priced issue a miss.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Jul 27, 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 Saketh Exim 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 Saketh Exim IPO worth investing. The Saketh Exim IPO Note sets the IPO expectations in systematic way which tells you if Saketh Exim IPO good to buy (good or bad / yes or no). The IPO Forecast tells you weather to invest in Saketh Exim IPO by providing IPO recommendations i.e. subscribe, avoid and neutral.


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