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Shri Venkatesh BSE SME IPO review (May apply)

Review By Dilip Davda on Sep 25, 2021

•    SVRL is engaged in soya and cotton seeds oil refining and preservations. 
•    It has posted steady growth in top and bottom lines.
•    Edible oil refining business is the high volume/low margin segment.
•    Cash surplus investors may consider parking funds with a long term perspective.

ABOUT COMPANY:
Shri Venkatesh Refineries Ltd. (SVRL) is primarily engaged in the business of refining and preservation of Edible oils mainly soya bean oil and cottonseed oil. The business process involves the purchase of the raw oil, then refining, packaging and selling of the edible oil. At present, the Company has a refining capacity of almost 36000 tons. Apart from the refining of edible oil, it is also engaged in the business of trading edible oil mainly soya bean oil, cottonseed oil and palm oil.

It is one of the growing companies engaged in the refining of edible oil in the Maharashtra region selling the edible oil under the brand name "Rich Soya". SVRL focuses on creating "Rich Soya" a leading brand name among the different edible oil brands by serving good quality and healthy edible oil at affordable prices.

In 2018 the company set up environment-friendly solar power panels of 650KWH at its factory premises. The electricity generated at these solar plants is used for captive consumption by the company.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for working capital (Rs. 8.78 cr.) and general corporate funds (Rs. 1.47 cr.), SVRL is coming out with a maiden IPO of 2928000 equity shares of Rs. 10 each at a fixed price of Rs. 40 per share to mobilize Rs. 11.71 cr. The issue opens for subscription on September 29, 2021, and will close on October 01, 2021. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.47% of the post issue paid-up capital of the company. SVRL is spending Rs. 1.46 cr. for this IPO process. This indicates that the issue is fully structured with one time subscriptions in hand. 

The issue is solely lead managed by Hem Securities Ltd. and Purva Sharegistry (India) Pvt. Ltd. is the registrar to the issue. Hem Finlease Pvt. Ltd. is the market maker for this issue. 

Having issued initial equity at par, the company raised further equity at Rs. 16 per share in March 2020 and has also issued bonus shares in the ratio of 2 for 1 in March 2019 and 1 for 3 in September 2020. The average cost of acquisition of shares by the promoters is Rs. 3.70, Rs. 4.28, Rs. 4.37 and Rs. 6.57 per share.  

Post issue SVRL's current paid-up equity capital of Rs. 8.13 cr. will stand enhanced to Rs. 11.06 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 44.24 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, SVRL has posted turnover/net profits of Rs. 227.00cr. / Rs. 1.26 cr. (FY19), Rs. 235.52 cr. / Rs. 2.21 cr. (FY20) and Rs. 337.00 cr. / Rs. 3.51 cr. (FY21). Thus the company is in the high volume/low margin segment of the refining business. 

For the last three fiscals, SVRL has reported an average EPS of Rs. 3.70 and an average RoNW of 23.38%. The issue is priced at a P/BV of 2.41 based on its NAV of Rs. 16.59 as of March 31, 2021, and at a P/BV of 1.76 based on its post-IPO NAV of Rs. 22.79.

If we attribute FY21 earnings on fully diluted post issue paid-up equity capital, then the asking price is at a P/E of around 12.62. Thus the issue is fully priced. 

COMPARISON WITH LISTED PEERS:
As per offer documents, SVRL has shown Gokul Agro, BCL Ind., Vijay Solvex and Ajanta Soya as its listed peers. They are currently trading at a P/E of 13.75, 10.75, 10.1 and 5.99 (as of September 24, 2021). However, they are not truly comparable on an apple to apple basis. 

DIVIDEND POLICY:
SVRL has not declared any dividend in the last five years. However, it will adopt a prudent dividend policy post listing based on its financial performance and future prospects. 

MERCHANT BANKER'S TRACK RECORDS:
This is the 13th mandate from Hem Securities in the last three fiscals (including the ongoing one). While the last mandate of Prevest is yet to be listed, out of the last 10 listings, 1 opened at discount, 3 at par and the rest with premiums ranging from 0.4% to 37.2% on the day of listings. 


Conclusion / Investment Strategy

The company operates in a high volume/thin margin segment of edible oil refining. It has posted steady growth in top and bottom lines for the last three fiscals. Based on financial parameters, the issue is fully priced. Cash surplus investors may consider an investment with a long term perspective.

Review By Dilip Davda on Sep 25, 2021

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

Shri Venkatesh Refineries IPO FAQs

  1. 1. Why Shri Venkatesh Refineries IPO?

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

  2. 2. How is Shri Venkatesh Refineries IPO?

    Read the Shri Venkatesh Refineries IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Shri Venkatesh Refineries IPO what should investors do?

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

  4. 4. Is Shri Venkatesh Refineries IPO good?

    Our recommendation for Shri Venkatesh Refineries IPO is to subscribe for long term.

  5. 5. Is Shri Venkatesh Refineries IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Shri Venkatesh Refineries IPO.

  6. 6. When will Shri Venkatesh Refineries IPO allotment status?

    The Shri Venkatesh Refineries IPO allotment status will be available on or around Oct 6, 2021. The allotted shares will be credited in demat account by Oct 8, 2021. Visit Shri Venkatesh Refineries IPO allotment status to check.

  7. 7. When will Shri Venkatesh Refineries IPO list?

    The Shri Venkatesh Refineries IPO will list on Monday, October 11, 2021, at BSE SME.

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