Review By Dilip Davda on Sep 25, 2018
• SPL is engaged in the field of technical yarn.
• It has posted super performance for FY18; sustainability of the same is a concern.
• This is the 2nd mandate from LM. First one yet to be listed.
• Issue appears fully priced. May be considered for long term.
Shubham Polyspin Ltd. (SPL) is engaged in the manufacturing of Polypropylene (PP) multifilament yarn. This yarn offer compact and flexible solutions for varied applications. Such high tenacity air intermingled yarns is used for sewing threads, webbings & slings, braids & ropes and other variety of technical textiles. Currently the company has overall installed capacity of 250 MT/month for this yarn and is being marketed under the brand name "Shublon".
ISSUE DETAILS/CAPITAL HISTORY:
To part finance its plans of modernization of plant and machinery, development of new products, working capital and general corpus fund needs, SPL is coming out with a maiden IPO of 1500000 equity shares of Rs. 10 each at a fixed price of Rs. 40 per share to mobilize Rs. 6.00 cr. Issue opens for subscription on 28.09.18 and will close on 04.10.18. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue constitutes 27.22% of the post issue paid up capital of the company. Issue is solely lead managed by Beeline Broking Ltd. while Link Intime India Pvt. Ltd. is the registrar to the issue. SPL has issued entire capital at par so far. Average cost of acquisition of shares by the promoters is Rs. 10 per share. Post issue, SPL’s current paid up capital of Rs. 4.01 cr. will stand enhanced to Rs. 5.51 cr.
On performance front, for last four fiscals, SPL has posted turnover/net profits of Rs. 13.55 cr. / Rs. 0.20 cr. (FY15), Rs. 15.40 cr. / Rs. 0.25 cr. (FY16), Rs. 17.71 cr. / Rs. 0.22 cr. (FY17) and Rs. 28.27 cr. / Rs. 1.48 cr. While it suffered a setback on bottom line for FY17, jump in top and bottom line for FY18 is a bit surprising. It has been showing around 88% capacity utilization of its total installed capacities for all these years. For last three fiscals, it has posted an average EPS of Rs. 2.23 and an average RoNW of 14.74%. Issue is priced at a P/BV of 2.60 based on its NAV of Rs. 15.37 as on 31.03.18, and at a P/BV of 1.81 based on post issue NAV of Rs. 22.08. If we consider FY18 super earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 15. Thus issue appears fully priced. Sustainability of super performance of FY18 is a concern.
As per offer documents, it has shown Garware Technical as its listed peers that is currently trading at a P/E of around 22 (as on 25.09.18). Garware Technical is not strictly comparable with SPL on product line basis.
MERCHANT BANKER’S TRACK RECORD:
On merchant banker’s front, this is 2nd mandate from its stable and the first mandate is to be listed shortly. Thus no track record for past mandate listing is available.
Issue appears fully priced on the given financial data. Cash surplus investors may consider investment for long term.
Review By Dilip Davda on Sep 25, 2018
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 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.
The Shubham Polyspin 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 Shubham Polyspin IPO worth investing. The Shubham Polyspin IPO Note sets the IPO expectations in systematic way which tells you if Shubham Polyspin IPO good to buy (good or bad / yes or no). The IPO Forecast tells you weather to invest in Shubham Polyspin IPO by providing IPO recommendations i.e. subscribe, avoid and neutral.
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