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Review By Dilip Davda on August 10, 2023
• SDL which was incorporated for the textiles and apparel business is now in the rough diamond processing business.
• It started operations in diamonds from FY22 only.
• For the last two fiscals, it has posted minuscule financial performance.
• The IPO is greedily priced based on its FY23 earnings.
• There is no harm in skipping this pricey issue.
ABOUT COMPANY:
Shoora Designs Ltd. (SDL) was initially incorporated for the business of the "Textiles & Apparel" industry and then in 2022, it opted for the business of processing rough diamonds. It is operating in Surat and nearby regions only for its diamond trades. It has recently explored markets in Mumbai for its diamond business. It sells its products to diamond wholesalers and jewellery manufacturers in the domestic market of Surat and Mumbai. The company is marking its diamonds on offline as well as online platforms.
So far the company has reported minuscule operations for the last two fiscals. It is operating in a highly competitive and fragmented segment. As of the date of filing this offer document, it had 9 employees on its payroll.
ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden IPO of 423000 equity shares of Rs. 10 each at a fixed price of Rs. 48 per share to mobilize Rs. 2.03 cr. The issue opens for subscription on August 17, 2023, and will close on August 21, 2023. The minimum application to be made is for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 28.23% of the post-IPO paid-up capital of the company. SDL is spending Rs. 0.25 cr. for this IPO process, and from the net proceeds, it will utilize Rs. 1.35 cr. for working capital, and Rs. 0.43 cr. for general corporate purposes.
Swaraj Shares and Securities Pvt. Ltd. is the sole lead manager and KFin Technologies Ltd. is the registrar of the issue. Rikhav Securities Ltd. is the market maker for the company.
After issuing initial equity shares at par value, the company issued/converted further equity shares at a price of Rs. 48 per share in December 2022 and has also issued bonus shares in the ratio of 5 for 2 in January 2023. The average cost of acquisition of shares by the promoters is Rs.13.23, Rs. 13.29, and Rs. 13.55 per share.
Post-IPO, SDL's current paid-up equity capital of Rs. 1.08 cr. will stand enhanced to Rs. 1.50 cr. Based on the IPO pricing, the company is looking for a market share of Rs. 7.19 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has reported a turnover/net profit - (loss) of Rs. 0.00 cr. / Rs. - (0.005) cr. (FY21), Rs. 0.16 cr. / Rs. 0.04 cr. (FY22), and Rs. 2.11 cr. / Rs. 0.12 cr. (FY23).
In the earning per share data, the offer document has suppressed info. It shows only the basis average EPS of Rs. 12.88 and missing diluted EPS info for the last three fiscals. Its average RoNW stood at 19.24%. The issue is priced at a P/BV of 3.26 based on its NAV of Rs. 14.74 as of March 31, 2023, and at a P/BV of 1.99 based on its post-IPO NAV of Rs. 24.13 per share.
If we attribute FY23 earnings to the post-IPO fully diluted paid-up equity capital of the company, then the asking price is at a P/E of 63.16. Thus the IPO is greedily priced.
The company has given its financial data in Rs. 000 (i.e. in Rupees thousands) which appears to be an eyewash.
DIVIDEND POLICY:
The company has not declared any dividends since incorporation. It will adopt a prudent dividend policy post-listing, based on its financial performance and future prospects.
COMPARISON WITH LISTED PEERS:
As per the offer document, the company shows Ashapuri Gold, DP Abhushan, Starlineps Enterprise, and Veeram Securities as their listed peers. They are currently trading at a P/E of around 150.29, 17.95, 00, and 25.29 (as of August 10, 2023). This list of peers is a big surprise. However, they are not truly comparable on an apple-to-apple basis.
MERCHANT BANKER'S TRACK RECORD:
This is the first mandate from Swaraj Shares and hence there is no track record.
Review By Dilip Davda on August 10, 2023
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. My reviews do not cover GMP market and operators game plans. Readers must consult a qualified financial advisor before making any actual investment decisions, based the on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the recent past, SME IPOs drew the attention of investors across the board and lead to seer madness. 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 their own risk. The above information is based on information available as of date coupled with market perceptions. The Author has no plans to invest in this offer.
About 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.
(Dilip Davda -SEBI registered Research Analyst-Mumbai,
Registration no. INH000003127 (Perpetual)
Email id: dilip_davda@rediffmail.com ).
The initial public offer (IPO) of Shoora Designs Limited offers an early investment opportunity in Shoora Designs Limited. A stock market investor can buy Shoora Designs IPO shares by applying in IPO before Shoora Designs Limited shares get listed at the stock exchanges. An investor could invest in Shoora Designs IPO for short term listing gain or a long term.
Read the Shoora Designs IPO recommendations by the leading analyst and leading stock brokers.
Shoora Designs IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Shoora Designs IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.
Our recommendation for Shoora Designs IPO is to avoid.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Shoora Designs IPO.
The Shoora Designs IPO allotment status will be available on or around August 24, 2023. The allotted shares will be credited in demat account by August 28, 2023. Visit Shoora Designs IPO allotment status to check.
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