Sonam Clock NSE SME IPO review (May apply)

Review By Dilip Davda on May 29, 2018

Sonam Clock Ltd. (SCL) is a clock manufacturing Company situated in Morbi, Gujarat. It offers a wide range of table and wall clocks at various price points across budget, mid-level and premium styles. As on February’18, SCL is offering clocks from a price range of Rs. 100 to Rs. 1800 which includes LED digital clocks, LCD clocks, light sensor clocks, pendulum clocks, musical clocks,rotating pendulum musical clocks, sweep clocks, office clocks, designer clocks, alarm clocks, table clocks and regular clocks. It also offers customized corporate clocks in bulk quantities for corporate gifting purpose. Company’s products are sold mainly to clock dealers, retailers, corporates, gifts and novelties stores, through which it reaches to end consumers. SCL’s products are sold under the brand name of Sonam, ampm and Lotus. It has at present installed production capacity of approximately 72 lakhs p.a. for clocks and 240 lakhs p.a. for clock movements. A Clock movement, also known as caliber, is an internal mechanical part of the clock, which drives hour, minute and second hands of clock in motion. SCL is also engaged in sale of clock parts which includes clock movements, clock cases etc.

To part finance its repayment of unsecured loans, working capital requirements and general corpus fund needs, SCL is coming out with a maiden IPO of 2808000 equty shares of Rs. 10 each at a fixed price of Rs.36 per share to mobilize Rs.10.11 crore. Issue opens for sub scription on 01.06.18 and will close on 06.06.18. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Issue is solely lead managed by Hem Securities Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Issue constitutes 28.06% of the post issue paid up capital of the company. Its entire equity is issued at par. It has also given bonus shares in the ratio of 2 for 1 in March 2016 and 1 for 3 in December 2017. Average cost of acquisition of shares by the promoters is Rs. 2.43 and Rs. 2.50 per share. Post issue, its current paid up capital of Rs. 7.20 cr. will stand enhanced to Rs. 10.01 cr.

On performance front, for last four fiscals SCL has posted turnover/net profits of Rs. 33.55 cr. / Rs. 0.58 cr. (FY14), Rs. 34.06 cr. / Rs. 0.41 cr. (FY15), Rs. 36.82 cr. / Rs. 1.35 cr. (FY16) and Rs. 39.03 cr. / Rs. 0.81 cr. (FY17). For first nine months ended on 31.12.17 of FY18 it has earned net profit of Rs. 2.26 cr. on a turnover of Rs. 38.62 cr. which appears inflated figures. Its top line was almost static for FY 14 and 15 and grew for FY16 and FY17 but bottom line was inconsistent. First nine months figures are surprising one and raises concern on sustaining of it going forward as the sector is highly competitive and faces huge threat from unorganized players. For last three fiscals it has posted an average EPS of Rs. 1.28 and an average RoNW of 10.75%. Issue is priced at a P/BV of 2.23 on the basis of its NAV of Rs. 16.12 as on 31.12.17 and at a P/BV of 1.66 based on post issue NAV of Rs. 21.70. If we annualize latest super earnings and attribute it on fully diluted equity post issue then asking price is at a P/E of around 12. As per offer documents it is showing Opal Luxury Time as its listed peer which is not traded since 27th March 2018 (LTP Rs. 107) and as per AR of 2016-17 it has seen erosion in top line and incurred heavy losses. Its debt-equity ratio as on 31.12.17 is 2.15.

On merchant banker’s front, this is 30th mandate from its stable in last three fiscals and out of last 10 listings, 2 opened at discount to offer price, 8 with a premiums ranging from 2.67% to 20% on the day of listings


Conclusion / Investment Strategy

Although on the prima facie issue pricing appears reasonable, concern over sustainability of its super profits of first nine months of FY18 and its listed peer reporting losses for FY17 and having no trades for over two months hints at caution. Considering these cash surplus risk savvy investors may consider investment at their own risk.

Review By Dilip Davda on May 29, 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

Sonam Clock IPO FAQs

  1. 1. Why Sonam Clock IPO?

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

  2. 2. How is Sonam Clock IPO?

    Read the Sonam Clock IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Sonam Clock IPO what should investors do?

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

  4. 4. Is Sonam Clock IPO good?

    Our recommendation for Sonam Clock IPO is to subscribe for long term.

  5. 5. Is Sonam Clock IPO worth Investing?

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

  6. 6. When will Sonam Clock IPO allotment status?

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

  7. 7. When will Sonam Clock IPO list?

    The Sonam Clock IPO will list on Thursday, June 14, 2018, at NSE SME.








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