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Shubhlaxmi Jewel Art NSE SME IPO review (Avoid)

Review By Dilip Davda on Nov 16, 2018

•    SJAL has just single location operations.
•    Issue is priced very aggressively at 24 P/E against industry average of 12 P/E.
•    Financial data is showing average performance.
•    Sector is currently witnessing bad sentiment.

ABOUT COMPANY:
Shubhlaxmi Jewel Art Ltd. (SJAL) is engaged in the retail and wholesale business of various jewelleries and ornaments made out of Gold, Silver, Diamonds and Platinum studded with precious and semi-precious stones. Its product portfolio includes Mangalsutra, Patla, Chains, Necklace, Mala, Kandoro, Poncho, Payal, Rings, armlet, pendants, bracelets, bangles and other wedding jewelleries It caters to high-end, mid-market and value market segments. SJAL currently has only one showroom of 27000 sq. ft. at Bhavnagar and is in the process of setting up of own manufacturing unit. It procures materials from bullion and jewellery market deals in Gujarat.  

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its working capital and corpus fund needs, SJAL is coming out with a maiden IPO of 2504000 equity shares of Rs. 10 each at a fixed price of Rs. 26 per share to mobilize Rs. 6.51 cr.  Issue opens for subscription on 22.11.18 and will close on 27.11.18. Minimum application is to be made for 4000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Issue is solely lead managed by Pantomath Capital Advisors Pvt. Ltd. while Link Intime India Pvt. Ltd. is the registrar to the issue. Issue constitutes 30.15% of the post issue paid up capital of the company. Average cost of acquisition of shares by the promoters is Rs. 10.00 per share. Its entire equity is converted at par value. Post issue, SJAL’s current paid up equity capital of Rs. 5.80 cr. will stand enhanced to Rs. 8.30 cr.

FINANCIAL PERFORMANCE:
On financial performance front, for last four fiscals, SJAL has posted turnover/net profits of Rs. 45.14 cr. / Rs. 1.29 cr. (FY15), Rs. 47.43 cr. / Rs. 0.37 cr. (FY16), Rs. 43.44 cr. / Rs. 0.65 cr. (FY17) and Rs. 46.85 cr. / Rs. 0.82 cr. (FY18). Thus its top line is almost static around Rs. 46 cr. on an average with fluctuating margins. For FY19 due to conversion of partnership firm into company, it has shown two periods i.e. year ended 01.05.18 and year ended 31.05.18. If we combine these data then it has posted net profit of Rs. 0.15 cr. on a turnover of Rs. 6.12 cr. Thus this working may be attributed as its first two months revenues for ongoing fiscal. For last three fiscals, it has posted an average EPS of Rs. 1.19 and an average RoNW of 14.70%. Issue is priced at a P/BV of 2.58 on the basis of its NAV of Rs. 10.06 as on 31.05.18 and at a P/BV of 1.75 based on post issue NAV of Rs. 14.87. If we annualize first two months working and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 24 against industry average of 12.

COMPARE WITH LISTED PEERS:
As per offer documents, it has shown D P Abhushan, Moksh Ornament, Thangamayil as its listed peers that are currently trading at a P/E of around 13, 5 and 18 (as on 16.11.18 closing).

MERCHANT BANKER’S TRACK RECORDS:
On merchant banker’s front, this is the 74th mandate from its stable in last three fiscals. Out of last 10 listings, all opened at a premium ranging from 0.5% to 8% on the day of listing.


Conclusion / Investment Strategy

Issue is priced very aggressively. Sector is currently witnessing bad sentiment. Considering these there is no ham in giving this issue a miss.

Review By Dilip Davda on Nov 16, 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 Shubhlaxmi Jewel 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 Shubhlaxmi Jewel IPO worth investing. The Shubhlaxmi Jewel IPO Note sets the IPO expectations in systematic way which tells you if Shubhlaxmi Jewel IPO good to buy (good or bad / yes or no). The IPO Forecast tells you weather to invest in Shubhlaxmi Jewel IPO by providing IPO recommendations i.e. subscribe, avoid and neutral.


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