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Sorich Foils NE SME IPO review (Avoid)

Review By Dilip Davda on May 21, 2018

Sorich Foils Ltd. (SFL) is engaged in manufacturing and supplying a varied range of Aluminium Foils for Blister, Strip Foils, Cold Forming Foil, Coated Glassine Paper for Blister, Laminated Glassine Paper for Strip Pack, Child Resistant (CR) Foils, Aluminium Lid Foils, Triple Laminates, Flexible Packaging for Pharma & Food Industries, also FMCG packaging materials. This range is designed & developed utilizing advanced machinery and latest technology in complete adherence with the industry laid norms and standards. The offered range is appreciated among the clients for its features such as Water Vapor Resistance, Moisture & chemical barrier properties. These products are widely applicable in different industries such as Pharmaceutical Industries, FMCG packaging, Food and dairy industries, Confectionery / Chocolate industries & Personal Care Packaging.

To part finance its repayment/pre-payment of unsecured debts and general corpus fund needs, SFL is coming out with a maiden IPO of 2500000 equity shares of Rs. 10 ech at a fixed price of Rs. 16 per share to mobilize Rs. 4.00 crore. Issue opens for subscription on 24.05.18 and will close on 28.05.18. Minimum application is to be made for 8000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Issue is solely lead managed by Saffron Capital Advisors Pvt. Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue. Issue constitutes 30% of the post issue paid up capital of the company. Having issued initial equity at par, it raised further equity in the price range of Rs. 10 to Rs. 40 per share and has issued bonus shares in the ratio of 1 to 1 in January 2018. Average cost of acquisition of shares by the promoters is Rs. 12.75 per share. Post issue, Its paid up equity of Rs. 1 crore as on 31.03.17 got enhanced to Rs. 5.83 crore as on 31.01.18 and that will further stand enhanced to Rs. 8.33 cr. post issue.

On performance front, for last four fiscals SFL has (on a consolidated basis) posted turnover/net profits of Rs. 22.86 cr. / Rs. 0.20 cr. (FY14), Rs. 25.07 cr. / Rs. 0.22 cr. (FY15), Rs. 26.90 cr. / Rs. 0.19 cr. (FY16) and Rs. 26.59 cr. / Rs. 0.33 cr. (FY17). For first 10 months ended on 31.01.18 of FY18 it has earned net profit of Rs. 0.57 cr. on a turnover of Rs. 23.13 cr. Last two fiscals top line is almost static and bottom line has seen setback for FY16. For last three fiscals it has posted an average EPS of Rs. 4.17 and an average RoNW of 10.83%. Issue is priced at a P/BV of less than 1 on the basis of post issue NAV of Rs. 16.36. If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 19 plus against industry average of 7. As per offer documents it has considered Sysco Ind and PG Foils as its listed peers that are trading at a P/Es of around 2 and 7 respectively ( as on 21.05.18). Thus issue is priced very aggressively.

On merchant banker’s front, this is the 2nd mandate from its stable in last two fiscals. The only listing so far opened at a premium of 20% on the day of listing.


Conclusion / Investment Strategy

Considering aggressive pricing, there is no harm in giving this issue a miss.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on May 21, 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 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

The Sorich Foils IPO Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered IPO Analysts tells you if Sorich Foils IPO worth investing. The Sorich Foils IPO Note sets the IPO expectations in systematic way which tells you if Sorich Foils IPO good to buy (good or bad / yes or no). The IPO Forecast tells you weather to invest in Sorich Foils IPO by providing IPO recommendations i.e. subscribe, avoid and neutral.


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