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Silver Pearl BSE SME IPO review (Avoid)

Review By Dilip Davda on May 30, 2022

•    This hospitality company has posted minuscule financial data.
•    Based on super earnings for FY22, the asking price is exorbitant.
•    Post IPO low promoter equity and servicing of multifold post IPO equity are major concerns.
•    LM has a poor track record.
•    Investors may skip this pricy bet. 

ABOUT COMPANY:
Silver Pearl Hospitality & Luxury Spaces Ltd. (SPHLSL) is a hospitality company that operates in the mid-priced hotel sector, consisting of the upper-midscale, midscale and economy hotel segments. Its current properties are located in Rakchham, Kinnaur, Himachal Pradesh. Rakchham village is located in Sangla Tehsil of Kinnaur district in Himachal Pradesh, India. Rakchham village is around 10 km from Chitkul and around 12 km from Sangla and is located between the two. 

SPHLSL's first hotel property started operations in FY 19-20. It also operates a café at Rakchham. All hotels, cafes and restaurants are operated under the brand name "Osiya". The company provides authentic hospitality and gives its guests a localized and memorable experience. It seeks to cater to the family as well as adventure-loving guests and deliver differentiated yet superior service offerings, with a value-for-money proposition. Currently, it is operating with 36 rooms in 4 properties.

The Company has entered into an MoU dated January 1, 2022, for Online Marketing and Branding of Tashi Dolma Home stay situated at Bhabha Nagar, Tehsil Nichar, District Kinnaur, Himachal Pradesh on a commission basis. The guest house will be known as "Osiya Tashi Dolma Home Stay". It has also entered into an MoU dated December 1, 2021, for Online Marketing and Branding of Baba Inn Guest Home situated at Bari, District Kinnaur, Himachal Pradesh on a commission basis. The guest house will be known as "Osiya Baba Inn Guest Home". As of the date of filing this offer document, it had 30 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for funding of Hotel Property in Goa (Rs. 6.50 cr.) and general corporate purposes (Rs. 1.80 cr.), SPHLSL is coming out with a maiden IPO of 5000000 equity shares of Rs. 10 each at a fixed price of Rs. 18 per share to mobilize Rs. 9.00 cr. The issue opens for subscription on June 06, 2022, and will close on June 09, 2022. Minimum application is to be made for 8000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 63.67% of the post issue paid-up capital of the company. SPHLSL is spending Rs. 0.70 cr. for this IPO process. 

The issue is solely lead managed by Inventure Merchant Banker Services Pvt. Ltd. and Purva Sharegistry (India) Pvt. Ltd. is the registrar to the issue. SVCM Securities Pvt. Ltd. is the market maker for the company. 

Having issued initial equity at par, the company issued further equity in the price range of Rs. 18 to Rs. 50 per share between March 2011 to February 2022. It has also issued bonus shares in the ratio of 1 for 1 in December 2013 and 15 for 10 in November 2021. The average cost of acquisition of shares by the promoters is Rs. 17.93 and Rs. 18.00 per share. 

Post-IPO, SPHLSL's current paid-up equity capital of Rs. 2.85 cr. will stand enhanced to Rs. 7.85 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 14.14 cr. 

FINANCIAL PERFORMANCE: 
On the financial performance front, for the last three fiscals, SPHLSL has posted turnover/net profits of Rs. 0.29 cr./ Rs. 0.001 cr. (FY20), Rs. 0.18 cr. / Rs. 0.03 cr. (FY21) and Rs. 0.46 cr. / Rs. 0.12 cr. (FY22). While its financial data is listless, its surge in the top and bottom line in the pre-IPO year raises eyebrows and sustainability concerns. 

For the last three fiscals, SPHLSL has posted an average EPS of Rs. 0.64 and an average RoNW of 2.59%. The issue is priced at a P/BV of 1.18 based on its NAV of Rs. 15.31 as of March 31, 2022, and at a P/BV of 1.06 based on its post-IPO NAV of Rs. 17.02 per share. 

If we attribute FY22 earnings on post IPO fully diluted equity capital, then the asking price is at a P/E of 120 making this offer exorbitantly priced with listless financial data. 

DIVIDEND POLICY:
SPHLSL has not declared any dividend since incorporation. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, SPHLSL has shown The Byke Hospitality, Kamat Hotels and Aruna Hotels as its listed peers. They are currently trading at a P/E of 00, 00 and 00 (as of May 30, 2022). Due to negative earnings, all these peers are trading at negative P/E. However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKER'S TRACK RECORDS:
This is the 6th mandate from Inventure Merchant Banker in the last four fiscals (including the ongoing one). Out of the last 5 listings. 2 opened at discount and the rest with premiums ranging from 0.05% to 57.14% on the day of listings. Omnipotent Ind. is perhaps the exceptional case so far. It has a poor track record.


Conclusion / Investment Strategy

The company has minuscule financial data and despite super earnings for FY22, its exorbitant asking price are the pinpoints. Other major concerns are the low promoter equity post IPO and servicing to multifold paid-up equity. There is no harm in skipping this pricy offer.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on May 30, 2022

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

Silver Pearl Hospitality IPO FAQs

  1. 1. Why Silver Pearl Hospitality IPO?

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

  2. 2. How is Silver Pearl Hospitality IPO?

    Read the Silver Pearl Hospitality IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Silver Pearl Hospitality IPO what should investors do?

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

  4. 4. Is Silver Pearl Hospitality IPO good?

    Our recommendation for Silver Pearl Hospitality IPO is to avoid.

  5. 5. Is Silver Pearl Hospitality IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Silver Pearl Hospitality IPO.

  6. 6. When will Silver Pearl Hospitality IPO allotment status?

    The Silver Pearl Hospitality IPO allotment status will be available on or around Jun 14, 2022. The allotted shares will be credited in demat account by Jun 16, 2022. Visit Silver Pearl Hospitality IPO allotment status to check.

  7. 7. When will Silver Pearl Hospitality IPO list?

    The Silver Pearl Hospitality IPO will list on Friday, June 17, 2022, at BSE SME.