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Novateor Research BSE SME IPO review (Avoid)

Review By Dilip Davda on August 29, 2019

•    NRLL is in novel personal care product business with just one product with three variants.
•    It has dismal financial data despite jump for top and bottom line in a pre-IPO year.
•    LM has poor track records.
•    The issue is priced exorbitantly and may be skipped.

Novateor Research Laboratories Ltd. (NRLL) is leading the development of novel personal care products that are intended to provide a safe, easy and innovative approach to the existing traditional personal care solutions. NRLL develops products that could provide significant clinical as well as commercial advantages.

Currently, the company manufactures FDCA approved teeth whitening products in three variants and are marketed under the brand name ' SmiloShine'.  The company intends to expand its business in cosmetics, various health care pharma products and speciality pharma in the near future.

To part finance its needs for working capital (Rs. 4.24 cr.) NRLL is coming out with its maiden IPO of 1872000 equity shares of Rs. 10 each at a fixed price of Rs. 24 per share to mobilize Rs. 4.49 cr. The issue opens for subscription on 30.08.19 and will close on 04.09.19. 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 38.72% of the post issue paid-up equity capital of the company. NRLL will spend Rs. 0.25 cr. for raising Rs. 4.49 cr.

The issue is solely lead managed by First Overseas Capital Ltd. and Karvy Fintech Pvt. Ltd. is the registrar to the issue. Beeline Broking Ltd. is acting as the market maker for this issue. Having issued initial equity at par, the company further issued/converted equity shares in the price range of Rs. 185 - Rs. 250 between March 2012 - February 2019. It has also issued bonus shares in the ratio of 17 shares for every 1 share held in February 2019. The average cost of acquisition of shares by the promoters is Rs. 10.07 and Rs. 10.10 per share. Post issue, NRLL's current paid-up equity capital of Rs. 2.96 cr. will stand enhanced to Rs. 4.83 cr.

On the financial performance front, for the last three fiscals, NRLL has posted turnover/net profits - (loss) of Rs. 0.16 cr. / Rs. - (0.003) cr. (FY17), Rs. 0.11 cr. / Rs. 0.001 cr. (FY18) and Rs. 0.51 cr. / Rs. 0.22 cr. (FY19). For the last three fiscals, NRLL has posted an average EPS of Rs. 0.37 and an average RoNW of 2.66%. The issue is priced at a P/BV of 1.74 on the basis of its NAV of Rs. 13.76 as on 31.03.19 and at a P/BV of 1.35 on the basis of post-issue NAV of Rs. 17.73. If we take FY19 earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 52 making it exorbitantly priced. Even its financial data is not matching the asking price.

As per offer documents, NRLL has shown Procter and Gamble Health as its listed peers which is very surprising. They are not at all comparable on an apple to apple basis. Procter and Gamble is currently trading at a P/E of around 8.4 (as on 29.08.19)

On merchant banker's track record front, this is the 14th mandate from its stable. Last mandate of Sudarshan Pharma could not garner the required subscription despite reducing the offer price and extension of the subscription period. Out of last 10 listings, 5 opened at discount to offer price and the rest with premiums ranging from 1.67% to 25%. Thus it has poor track records.

Conclusion / Investment Strategy

Financial data does not merit the exorbitant asking price. LM has a poor track record. There is no harm in giving this issue a miss.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on August 29, 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. 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: ).

Smiloshine IPO FAQs

  1. 1. Why Smiloshine IPO?

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

  2. 2. How is Smiloshine IPO?

    Read the Smiloshine IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Smiloshine IPO what should investors do?

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

  4. 4. Is Smiloshine IPO good?

    Our recommendation for Smiloshine IPO is to avoid.

  5. 5. Is Smiloshine IPO worth Investing?

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

  6. 6. When will Smiloshine IPO allotment status?

    The Smiloshine IPO allotment status will be available on or around September 9, 2019. The allotted shares will be credited in demat account by September 12, 2019. Visit Smiloshine IPO allotment status to check.

  7. 7. When will Smiloshine IPO list?

    The Smiloshine IPO will list on Friday, September 13, 2019, at BSE SME.