Spectrum Electrical NSE SME IPO review (Apply at your own risk)

Review By Dilip Davda on Sep 11, 2018

•    Company is in the field of designing and manufacturing of variety of components.
•    It is likely to face tough competition from unorganized players in the field.
•    Super performance for FY 18 appears to be the result of group company mergers.
•    Issue appears fully priced.
•    LM has poor track record.

ABOUT COMPANY:
Spectrum Electrical Industries Ltd. (SEIL) is an ISO 9001:2015 certified company, engaged in the business of designing and manufacturing of electrical, automobile and irrigation components as contract manufacturers and as component suppliers to leading industry players on Business-to-Business (B2B) model. Company’s focus has been on providing one-stop-shop solutions mainly to manufacturers of electrical products and components in India. It offers integrated design and manufacturing solutions for local and internationally recognised brands in the electrical products industry. Company has developed ability to manufacture most of these products from the concept and design stage up to the final delivery to the customer’s distribution network thereby covering the entire value chain. Thus SEIL offers end-to-end product solutions to its customers under the B2B model wherein it provides services ranging from global sourcing, manufacturing, quality testing and packaging to logistics. Company also offers products in the intermediate stages to many of its customers.

ISSUE DETAILS/CAPITAL HISTORY
To part finance its plans to set up zinc plating plant at Umale, working capital and general corpus fund needs, SEIL is coming out with a maiden IPO of 3980000 equity shares of Rs. 10 each at a fixed price of Rs. 65 per share. Company plans to mobilize Rs.25.87 cr. Issue opens for subscription on 17.09.18 and will close on 21.09.18.Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Issue constitutes 26.32% of the post issue paid up capital of the company. Issue is solely lead managed by Arihant Capital Markets Ltd. while Bigshare Services Pvt. Ltd. is the registrar to the issue. Having issued initial equity at par, it raised further equity at a price of Rs. 32.70 per share (for a FV of Rs. 10 per share) as a consideration of merger process with group companies on a non-cash basis. Average cost of acquisition of shares by the promoters is Rs. 19.44 per share. Post issue, SEIL’s current paid up equity of Rs. 11.14 cr. will stand enhanced to Rs. 15.12 cr.

FINANCIAL PERFORMANCE:
On financial performance front, for last four fiscals, SEIL has posted turnover/net profits of Rs. 0.14 cr. / Rs. 0.02 cr. (FY15), Rs. 2.16 cr. / Rs. 0.30 cr. (FY16), Rs. 6.60 cr. / Rs. 0.53 cr. (FY17) and Rs. 119.83 cr. / Rs. 5.90 cr. (FY18). SEIL has shown quantum jump in top and bottom line for FY18 ( This appears to be the result of merging of all group companies). For last three fiscals, it has posted an average EPS of Rs. 3.11 and an average RoNW of 12.77%. Issue is priced at a P/BV of 2.15 on the basis of its NAV of Rs. 30.28 as on 31.03.18 and at a P/BV of 1.65 on the basis of post issue NAV of Rs. 39.42. If we consider FY18 super earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 16.67. Issue appears fully priced and sustainability of super earnings shown for FY18 is major concern.

COMPARE WITH LISTED PEERS:
As per offer documents, it has no listed peers to compare with.

MERCHANT BANKER’S TRACK RECORD.
On merchant banker’s front, in last three fiscals, this is the 2nd mandate from its stable after 2016-17. The only listing took place for Nitiraj opened at a discount to offer price on the day of listing. Currently this scrip trades around Rs. 51 against issue price of Rs. 100 per share. Thus it has poor track record.


Conclusion / Investment Strategy

Issue is fully priced, LM has poor track records. Company is likely to face tough competition from unorganized sectors in its field of operations. Considering all these, cash surplus risk savvy investors may consider investment at their own risk.

Review By Dilip Davda on Sep 11, 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

Spectrum Electrical IPO FAQs

  1. 1. Why Spectrum Electrical IPO?

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

  2. 2. How is Spectrum Electrical IPO?

    Read the Spectrum Electrical IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Spectrum Electrical IPO what should investors do?

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

  4. 4. Is Spectrum Electrical IPO good?

    Sorry, we didn't rate the Spectrum Electrical IPO.

  5. 5. Is Spectrum Electrical IPO worth Investing?

    Our lead analyst Mr. Dilip Davda didn't rate the Spectrum Electrical IPO.

  6. 6. When will Spectrum Electrical IPO allotment status?

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

  7. 7. When will Spectrum Electrical IPO list?

    The Spectrum Electrical IPO will list on Monday, October 1, 2018, at NSE SME.

1 Comments

Smart.Investor
1. Smart.Investor  Sep 18, 2018 16:39
Dilip ji, kudos for a good sum up personally knowing little. One thing you got completely wrong is about competition - they are lions - beat competition outright. They lead from the front, innovate and continually transform. Google SAP S/4 HANA to learn - you don't even mention it. It digitizes whole operations. Everyone wants but its not easy. Spectrum runs business on it already. About LM: Even SBI, ICICI, AXiS have 50% -ve listings, so what's the point? It boils down to company leadership and it is best to evaluate that than LM. So long...








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