Sanghvi Brands BSE SME IPO review (Avoid)

Review By Dilip Davda on Nov 7, 2017

Sanghvi Brands Ltd. (SBL) is managing and operation one of India’s leading integrated portfolio of Luxury Spa, Beauty, Wellness & Fitness Brands and one of the top largest Spa and Wellness Operator in India with license rights to operate various premium international brands including Spa by Clarins, Spa by L’Occitane, Elle Spas & Salons, Warren Tricomi Salon & Spa, Levo, Rosanno Ferretti, TAOS Salon, Ramona Braganza’s 3-2-1 Fitness programme. It also holds sole distributorship of Noveau Lashes for the territory of India to promote market and sell these products. It currently operates 19 Spa/Salons across the globe and another 9 Salons/Spa are under development. It has partnered with The Ritz Carlton San Fransisco, JW Marriot Mussoorie, Raichak Hotel in Kolkata, Khyber Resorts in Himalayas, Jammu & Kashmir, realty developers Lodha, IREO, K Raheja Corp etc.

To part finance business expansion plans, marketing and sales promotion of brands, strategic investments, general corpus fund needs, SBL is coming out with a maiden IPO of 2748000 equity shares of Rs. 10 each with a fixed price of Rs. 69 per share to mobilize Rs. 18.96 crore. Issue opens for subscription on 10.11.17 and will close on 14.11.17. Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. Issue constitutes 26.38% of the post issue paid up capital of the company. Average cost of acquisition of shares by promoters is Rs. 0.91 per share. Issue is solely lead managed by Sarthi Capital Advisors Pvt. Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Post allotment, shares will be listed on BSE SME. Having issued initial equity at par till March 2013, it raised further equity in a price range of Rs. 461.88 to Rs. 615.02 per share (between February 2014 and July 2016) and has also issued bonus shares in the ratio of 10 shares for every 1 share held in August 2017. Post issue, its current paid up equity capital of Rs. 7.67 crore will stand enhanced to Rs. 10.42 crore.

On performance front, SBL has (on a consolidated basis) posted turnover/net profits of Rs. 5.58 cr. / Rs. – (0.10) cr. (FY14), Rs. 9.96 cr. / Rs. 0.08 cr. (FY15), Rs. 15.06 cr. / Rs. – (0.86) cr. (FY16) and Rs. 26.70 cr. / Rs. 0.12 cr. (FY17). For Q1 of current fiscal, it has posted loss of Rs. - (0.28) crore on a turnover of Rs. 6.70 crore. Thus while top line has shown upward trends, bottom line has marked see-saw mod with profits and losses in alternate year. For last three fiscals, it has shown average EPS of Rs. - (0.31) and average RoNW of – (2.65%) on an equity base of Rs. 0.69 crore. Thus its net worth and earnings are not in line with asking price. If we annualize latest earnings and attribute it on fully diluted equity then it translates in to an EPS of Rs. – (1.07). Thus issue is priced exorbitantly.

On merchant banker’s front, this is the 35th mandate (including 1 main board IPO of Salasar) from its stable so far. Out of last 10 listings, 2 IPOs opened at discount, one at par and the balance 7 with a premium ranging from 3% to 131% premium on offer price on the day of listing. 131% rewards were from its main line IPO.

Conclusion: Considering negative returns and inconsistent track record, here is no harm in giving this issue a miss. (Avoid)

Conclusion / Investment Strategy

Considering negative returns and inconsistent track record, here is no harm in giving this issue a miss. (Avoid)

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Nov 7, 2017

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

Sanghvi Brands IPO FAQs

  1. 1. Why Sanghvi Brands IPO?

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

  2. 2. How is Sanghvi Brands IPO?

    Read the Sanghvi Brands IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Sanghvi Brands IPO what should investors do?

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

  4. 4. Is Sanghvi Brands IPO good?

    Our recommendation for Sanghvi Brands IPO is to avoid.

  5. 5. Is Sanghvi Brands IPO worth Investing?

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

  6. 6. When will Sanghvi Brands IPO allotment status?

    The Sanghvi Brands IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit Sanghvi Brands IPO allotment status to check.

  7. 7. When will Sanghvi Brands IPO list?

    The Sanghvi Brands IPO will list on Wednesday, November 22, 2017, at BSE SME.