Sona Hi Sona NSE SME IPO review (May apply)

Review By Dilip Davda on Sep 27, 2019

 •    SHSJL is trading in gold/silver jewellery and diamonds/stones.
•    It gets job work done from the third party.
•    Products are marketed under the brand names "Sona Hi Sona", "Freya" and "Jinansh".
•    The company has posted dismal financial performance so far.
•    The company has just one showroom and 9 employees.
 
ABOUT COMPANY:
Sona Hi Sona Jewellers (Gujarat) Ltd. (SHSJL) is into Job Work and Trading Business of Gold Jewellery and Ornaments. The Company gets the job work done from outside for its own designs. SHSJL's Product Collection list includes Gold Jewellery with or without studded precious and semi-precious stones. The company is also dealing in wholesale trading of branded Jewellery, Real Diamond and Silver Jewellery and Ornaments. The company is selling its products under the brand names of "Sona Hi Sona", "Freya" and "Jinansh". The company has just one showroom and total human strength of 9 employees including management.
 
ISSUE DETAILS/CAPITAL HISTORY:
To part finance its working capital (Rs. 3.72 cr.) and general corporate fund (Rs. 0.45 cr.) needs, SHSJL is coming out with a maiden IPO of 4500000 equity shares of Rs.10 each at par value. Through this issue, the company mulls mobilizing Rs. 4.50 cr. The issue opens for subscription on 30.09.19 and will close on 04.10.19. Minimum application is to be made for 10000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue Constitutes 26.81% of the post issue paid-up capital of the company. The issue is solely lead managed by Fedex Securities Ltd. while Link Intime India Pvt. Ltd. is the registrar to the issue. NNM Securities Pvt. Ltd. is acting as a market maker for this issue. The company is spending Rs. 0.33 cr. for this issue proceeds.
 
Having issued initial equity at par, SHSJL issued/converted further equity in the price range of Rs. 13.50 to Rs. 62 per share from March 2010 to June 2019. It has also issued bonus shares in the ratio of 4 for 1 in July 2017. The average cost of acquisition of shares by the promoters is Rs. 11.86 and Rs. 13.78 per share Post issue, SHSJL's current paid-up equity capital of Rs. 12.29 cr. will stand enhanced to Rs. 16.79 cr.
 
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, SHSJL has posted turnover/net profits of Rs. 54.48 cr. / Rs. 0.06 cr. (FY17), Rs. 59.03 cr. / Rs. 0.19 cr. (FY18) and Rs. 67.18 cr. / Rs. 0.39 cr. (FY19).  For the last three fiscals, the company has reported an average EPS of Rs. 0.38 and an average RoNW of 2.87%. The issue is priced at a P/BV of 0.75 on the basis of its NAV of Rs. 13.41 as on 31.03.19 and at a P/BV of 1.18 on the basis of post-issue NAV of Rs. 8.50. If we consider FY19 earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 43 against the industry average of 110.51. Although the issue is at par, it appears highly valued based on its financial performance.
 
COMPARISION WITH LISTED PEERS:
As per offer documents, the company has shown Ashapuri Gold, Palm Jewels, Shubhalaxmi Jewel, D P Abhushan and Moksh Ornaments as its listed peers that are currently trading at a P/Es of around 91, 111, 124, 8.4 and 5.37 (As on 27.09.19). Fancy P/Es in some of the peers are purely on account of well-managed market operations.
 
MERCHANT BANKER'S PERFORMANCE:
On merchant banker's front, this is the 9th mandate from its stable in the last three fiscals (including the ongoing one). Out of last 8 listings, 1 opened at discount, 1 at par and the rest with premiums ranging from 1.65% to 56.52% on the day of listing. Thus it has an average track record.


Conclusion / Investment Strategy

Although the issue is at par value, its financial performance is not compelling. The company is in a highly competitive business that has high volume, low margins. SHSJL has just one store and 9 employees. Investors have burnt their fingers in similar kind of issues in the past. Considering listless performance, only cash surplus, risk savvy investors may consider investing in this at par offer on their own risk.

Review By Dilip Davda on Sep 27, 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 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

Sona Hi Sona IPO FAQs

  1. 1. Why Sona Hi Sona IPO?

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

  2. 2. How is Sona Hi Sona IPO?

    Read the Sona Hi Sona IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Sona Hi Sona IPO what should investors do?

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

  4. 4. Is Sona Hi Sona IPO good?

    Our recommendation for Sona Hi Sona IPO is to subscribe for long term.

  5. 5. Is Sona Hi Sona IPO worth Investing?

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

  6. 6. When will Sona Hi Sona IPO allotment status?

    The Sona Hi Sona IPO allotment status will be available on or around Oct 10, 2019. The allotted shares will be credited in demat account by Oct 14, 2019. Visit Sona Hi Sona IPO allotment status to check.

  7. 7. When will Sona Hi Sona IPO list?

    The Sona Hi Sona IPO will list on Tuesday, October 15, 2019, at NSE SME.








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