Sky Gold BSE SME IPO review (Avoid)

Review By Dilip Davda on Sep 17, 2018

•    Company is having a single unit for its business.
•    FY18 results raises eyebrows being superb earnings in pre-IPO year.
•    Based on its average performance, issue pricing is exorbitant.
•    Merchant banker has poor track record.

ABOUT COMPANY:
Sky Gold Ltd. (SGL) is engaged in the business of designing, manufacturing and marketing of Gold jewelleries since its incorporation. It mainly deals in 22 Karat gold jewellery, offering a wide variety of designs to suit preferences of the end customer. Company provides an extensive range of designs and also uses studded American diamonds and / or coloured stones in many of jewellery products. SGL’s product range includes necklaces, rings, pendants, bracelets, earrings and bangles and customized jewellery based on customer demand. Besides, various clients in Mumbai and nearby areas, it also caters to various jewellery brands. Company operate from a 2,740 sq. ft. sole manufacturing facility which is located in the heart of Mumbai city in Mulund (West) where it makes casting based jewellery using rubber dye, wax moulds and machines.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its plans for repayment of loans (from promoters), working capital and general corpus fund needs, SGL is coming out with a maiden IPO of 1420000 equity shares of Rs. 10 each with a fixed price of Rs. 180 per share. Issue opens for subscription on 18.09.18 and will close on 21.09.18. SGL mulls mobilizing Rs. 25.56 crore via this issue. Minimum application is to be made for 800 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue constitutes 26.43% of the post issue paid up capital of the company. Issue is solely lead managed by Aryaman Financial Services Ltd. while Link Intime India Pvt. Ltd. is the registrar to the issue.  Having raised initial equity at par, it raised further equity in the price range of Rs. 50 to Rs. 100 per share between January 2011 and May 2015. It has also issued bonus shares in the ratio of 3 for 1 in March 2018. Average cost of acquisition of shares by the promoters is Rs. 15.88 and Rs. 15.99 per share.  Post issue its current paid up equity capital of Rs. 3.95 cr. to Rs. 5.37 cr.

FINANCIAL PERFORMANCE:
On performance front, for last four fiscals, SGL has posted turnover/net profits of Rs. 127.77 cr. / Rs. 0.82 cr. (FY15), Rs. 183.31 cr. / Rs.0.94 cr. (FY16), Rs. 164.41 cr., . Rs. 0.94 cr. (FY17) and Rs. 548.90 cr. / Rs. 2.63 cr. (FY18). Sudden jump in pre-IPO year for top and bottom line is the major concern and raises doubt on sustainability of the same performance going forward.  For last three fiscals, it has posted an average EPS of Rs. 4.52 and an average RoNW of 14.21%. Issue is priced at a P/BV of 5.11 based on its NAV of Rs. 34.11 as on 31.03.18 and at a P/BV of 2.48 on the basis of post issue NAV of Rs. 72.68. Based on superb earnings of FY18 the asking price is at a P/E of around 37 making it aggressively priced offer as industry average is around 31.

COMPARE WITH LISTED PEERS:
As per offer documents, it has shown Patdiam, Kenvi and Renaissanse as its listed peers that are currently trading at a P/E of around 36, 84 and 15 respectively (as on 17.09.18). All these are not strictly comparable with SGL.

MERCHANT BANKER’S TRACK RECORD:
On merchant banker’s front, this is the 38th mandate from its stable in last four fiscal years. Out of last 10 listings, 1 opened at discount, 3 around par and the rest with premium ranging from 1 to 6% on the day of listing. Thus it has poor track record.


Conclusion / Investment Strategy

Currently sentiment for jewellery sector is very weak. Company’s financial too are not that appealing except FY18 which raised IPO with superb earnings in pre-IPO year. Pricing of the issue is very aggressive and major chunk of fund is going for repayment of loans from promoters. There is no harm in giving this issue a miss. 

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Sep 17, 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 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

Sky Gold IPO FAQs

  1. 1. Why Sky Gold IPO?

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

  2. 2. How is Sky Gold IPO?

    Read the Sky Gold IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Sky Gold IPO what should investors do?

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

  4. 4. Is Sky Gold IPO good?

    Our recommendation for Sky Gold IPO is to avoid.

  5. 5. Is Sky Gold IPO worth Investing?

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

  6. 6. When will Sky Gold IPO allotment status?

    The Sky Gold IPO allotment status will be available on or around Sep 26, 2018. The allotted shares will be credited in demat account by Sep 28, 2018. Visit Sky Gold IPO allotment status to check.

  7. 7. When will Sky Gold IPO list?

    The Sky Gold IPO will list on Thursday, October 4, 2018, at BSE SME.








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