S K International BSE SME IPO review (Avoid)

Review By Dilip Davda on Jun 24, 2019

  • SKIEL is engaged in manufacturing and exports of Scarves, Beachwear and Ethnic wears.
  • Financial data shows a static top line. Surprisingly it posted bumper net for FY18.
  • Issue is priced very aggressively.
  • LM has an average track record.

 
ABOUT COMPANY:

S K International Export Ltd. (SKIEL) is a manufacturer and exporters in Scarves and Beachwears and catering to domestic as well as international markets. It is engaged in manufacturing of women and men's apparels like scarves, shawls, sarongs, headband, Bandanas and Beachwear in all qualities like silk, viscose, cotton, polyester, wool and other several blends. SKIEL has also entered into ethnic wears like Dupattas.
 
ISSUE DETAILS/CAPITAL HISTORY:

To part finance its needs for working capital (Rs. 3.01 cr.) and general corpus fund (Rs. 0.70 cr.), SKIEL is coming out with a maiden IPO of 1980000 equity shares of Rs. 10 each at a fixed price of Rs. 20 per share to mobilize Rs. 3.96 cr. The issue opens for subscription on28.06.19 and will close on 05.07.19. Minimum application is to be made for 6000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue constitutes 27.01% of the post issue paid up capital of the company. Company is spending Rs. 0.25 cr. for the issue process.

 
The issue is solely lead managed by Finshore Management Services Ltd. while Karvy Fintech Pvt. Ltd. is the registrar to the issue.  Wellworth Share & Stock Broking Ltd. is acting as a Market Maker for this issue.
 
SKIEL has issued entire equity at par so far. The average cost of acquisition of shares by the promoters is Rs. 10 per share. Post issue SKIEL's current paid up equity capital of Rs. 5.35 cr. will stand enhanced to Rs. 7.33 cr.

 
FINANCIAL PERFORMANCE:

On the financial performance front, for the last three fiscals, SKIEL has posted turnover/net profits of Rs. 9.35 cr. / Rs. 0.11 cr. (FY16), Rs. 9.39 cr. / Rs. 0.34 cr. (FY17) and Rs. 9.66 cr. / Rs. 1.53 cr. (FY18). Thus while its top line remained almost static, it posted a hectic net profit for FY18 (i.e. pre-IPO year) raising concern. For the first 10 months of FY19 ended on 31.01.19, it has earned a net profit of Rs.0.39 cr. on a turnover of Rs. 8.63 cr. For the last three fiscals, it has posted an average EPS of Rs. 1.92 and an average RoNW of 23.15% due to bumper net showed for FY18. The issue is priced at a P/BV of 1.94 on the basis of its NAV of Rs. 10.33 as on 31.01.19.

 
However, if we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 31 against the industry average of around 28. Thus the issue is priced aggressively.
 
COMPARE WITH LISTED PEERS:

As per offer documents, SKIEL has shown Kewal Kiran and Jindal Worldwide as its listed peers that are currently trading at a P/Es of around 17 and 51 (as on 24.06.19). However, they are strictly not comparable.
  
MERCHANT BANKER'S TRACK RECORDS:

On merchant banker's front, this is the 13th mandate from its stable in the last four fiscals. Out of the last 10 mandates 1 opened at par, 3 at discounts and the rest at premiums ranging from 1.63% to 20.67% on the day of listings.


Conclusion / Investment Strategy

Currently, the textile segment is not fancied by investors. The issue is priced aggressively. SKIEL has shown average financial performance so far. There is no harm in giving this issue a miss.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Jun 24, 2019

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

SK International IPO FAQs

  1. 1. Why SK International IPO?

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

  2. 2. How is SK International IPO?

    Read the SK International IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. SK International IPO what should investors do?

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

  4. 4. Is SK International IPO good?

    Our recommendation for SK International IPO is to avoid.

  5. 5. Is SK International IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the SK International IPO.

  6. 6. When will SK International IPO allotment status?

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

  7. 7. When will SK International IPO list?

    The SK International IPO will list on Monday, July 15, 2019, at BSE SME.

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