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Sirca Paints NSE SME IPO review (May apply)

Review By Dilip Davda on May 10, 2018

Sirca Paints India Ltd. (SPIL) started its trading activities by importing Polyurethane Polish (PU) from Italy and wall paints, abrasives from Korea and selling them in India. It became the first Indian company to launch wood filler in India through its two branches at Chennai and Mumbai. Currently it is in marketing and trading/distribution of paints and allied products. Except paints it purchases other products such as thinner, abrasive etc. from domestic suppliers. It imports paints majorly from Sirca SPA Italy and sells in India. Now the company has entered into a exclusive manufacturing license agreement with Sirca SPA Italy for Paints NC, Paints AC, Thinner and Polyurethane products  with a initial capacity of 30 lakh kgs of PU Thinner, 36 lakh kgs of NC Lacquers and Malamine (each) and 20 lakh kgs of Polyurethane products.

To part finance its working capital, funding of new site development with plant and machinery, and general corpus fund needs, SPIL is coming out with a maiden IPO of 4869600 equity shares of Rs. 10 each via book building route with a price band of Rs. 151 – Rs. 160 to mobilize Rs. 73.53 Rs. 77.91 c. (based on lower and upper price bands). Issue opens for subscription on 16.05.18 and will close on 22.05.18. Minimum application is to be made for 800 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Issue is solely lead managed by Navigant Corporate Advisors Ltd. and Karvy Computershare Pvt. Ltd. is the registrar to the issue. Issue constitutes 26.65% of the post issue paid up capital of the company. Having issued initial equity at par, it raised further equity in the price range of Rs. 100 to Rs. 150 per share (including 700000 shares issued at Rs. 120 per share in February 2018). It has also issued bonus shares in the ratio of 122 for every 1 share held in December 2017. Average cost of acquisition of shares by the promoters is Rs. 0.33, Rs. 0.89 and Rs. 0.96 per share. Post issue, its current paid up equity capital of Rs. 13.40 cr. will stand enhanced to Rs. 18.27 cr.

On performance front, for last four fiscals SPIL has posted turnover/net profits of Rs. 54.08 cr. / Rs. 1.97 cr. (FY14), Rs. 69.77 cr. / Rs. 6.18 cr. (FY15), Rs. 72.66 cr. / Rs. 7.28  cr. (FY16) and Rs. 84.34 cr. / Rs. 13.70 cr. (FY17). For first nine months ended on 31.12.17 of FY18 it has earned net profit of Rs. 14.60 cr. on a turnover of Rs. 64.70 cr. For last three fiscals it has posted an average EPS of Rs. 8.38 and an average RoNW of 39.89%. Growth in bottom line for past four fiscals is a bit surprising as it is mainly currently in a trading business. Issue is priced at a P/BV of 4.07 on the basis of NAV of Rs. 39.31 as on 31.12.17. If we annualize latest earnings and attribute it on fully diluted post issue equity then asking price is at a P/E of around 15 against industry average of around 41.30. However, its earnings for FY17 and FY18 (nine months) is surprising and may not sustain going forward as it is going in green field project  in a capital intensive segment which is facing cut throat competition and consumer taste keeps changing every now and then. As per offer documents it has shown giants Asian Paints and Kansai Nerolac as its listed peers that are trading at a P/E of around 56 and 53 (as on 10.05.18). As per market reports, these companies are selling such products at much cheaper rates, thus Sirca has a big threat going forward. Thus despite lucrative offer price, issue appears a risky bet.

On merchant banker’s front, this is 12th mandate from its stable in last three fiscals. Out of last 10 listings (including Dr. Lalchandani) , 4 opened at discount and 6 with a premium ranging from 5% to 20% on the day of listings.

Conclusion / Investment Strategy

Although based on superb performance of first nine months of FY18, pricing appears reasonable; it’s now venturing into manufacturing in highly competitive segment. Hence sustainability of margins raises concern. Considering these cash surplus risk savvy investors may consider investment at their own risk.

Review By Dilip Davda on May 10, 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. 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

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: ).

Sirca Paints IPO FAQs

  1. 1. Why Sirca Paints IPO?

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

  2. 2. How is Sirca Paints IPO?

    Read the Sirca Paints IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Sirca Paints IPO what should investors do?

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

  4. 4. Is Sirca Paints IPO good?

    Our recommendation for Sirca Paints IPO is to subscribe for long term.

  5. 5. Is Sirca Paints IPO worth Investing?

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

  6. 6. When will Sirca Paints IPO allotment status?

    The Sirca Paints IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit Sirca Paints IPO allotment status to check.

  7. 7. When will Sirca Paints IPO list?

    The Sirca Paints IPO will list on Wednesday, May 30, 2018, at NSE SME.