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Sumit Woods NSE SME IPO review (May apply)

Review By Dilip Davda on Aug 22, 2018

•    Realty developer having local play
•    Completed 49 projects, ongoing 9 projects
•    FY 18 earnings due to well planned financial closure.
•    Orders on hand worth Rs. 300 crore plus
•    Appealing Issue priced around 9 PE

ABOUT COMPANY:
Sumit Woods Ltd. (SWL) that started civil construction business in Goa as a partnership firm is now converted into a public limited company.  It executed projects for Modern Bread, Railway Officers and Government Holiday Homes. Currently SWL is engaged in constructions of residential buildings, re-development and SRA area developing. It has already completed 49 projects in Goa and Maharashtra (particularly in Mumbai and Thane region). Currently it has around 9 ongoing projects out of which 6 are in Maharashtra and 3 in Goa. According to management, they are designing and developing projects based on local demand and environment as per the preference of local public. It caters to middle and higher middle class population. Company is known for timely completion of projects and is also registered with RERA.

CAPITAL HISTORY/ISSUE DETAILS:
To part finance its plans for repayment/pre-payment of certain debts, working capital, and general corporate fund needs, SWL is coming out with a maiden IPO of 4053000 equity shares of Rs. 10 each via book building issue. It has fixed the price band of Rs. 43 – Rs. 45 per share and mulls mobilization of  Rs. 17.43 cr. to Rs. 18.24 cr. (based on lower and upper price bands). The issue opens for subscription on 29.08.18 and will close on 31.08.18. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue is solely lead managed by Mark Corporate Advisors Pvt. Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Issue constitutes 26.50% of the post issue paid up capital of the company.

Having issued initial equity at par, SWL raised further equity in the price range of Rs. 40 to Rs. 360 per share between October 2009 and May 2018. It has also issued bonus shares in the ratio of 4 for 11 shares in November 2017. Post issue, SWL’s current paid up equity capital of Rs. 11.24 cr. will stand enhanced to Rs. 15.29 cr. The average cost of acquisition of shares by the promoters is Rs. 4.97, Rs. 7.33, Rs. 8.83 and Rs. 18.23 per share.

FINANCIAL PERFORMANCE:
On the performance front, for last four fiscals, SWL has (on a consolidated basis) posted total turnover/net profits of Rs. 29.51 cr. / Rs. 0.85 cr. (FY15), Rs. 29.61 cr. / Rs. 0.75 cr. (FY16), Rs. 46.97 cr. / Rs. 3.13 cr. (FY17) and Rs. 34.33 cr. / Rs.7.74 cr. (FY18). This sudden spurt in bottom lines for FY17 and FY18 is raising eyebrows.  For the last three fiscals, on a consolidated basis, it has posted an average EPS of Rs. 4.67 and an average RoNW of 10.76%. The issue is priced at a P/BV of around 1 on the basis of its NAV of Rs. 45.66 as on 31.03.18 that will stand Rs. 45.48 post issue. If we take into account latest superb earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 9 (at upper price band) against industry average P/E of 20. This issue is attractively priced. According to management, it follows SPV (special purpose vehicles) method for developments of each project on profit sharing basis. Due to this top line is going in those SPV’s account with related expenses and only the share of profit comes to SWL and that’s the reason for the sudden spurt in the bottom line. At present, it has work on hand of approx. Rs. 300 cr. plus and management is confident of maintaining its margin trends.

LISTED PEERS COMPARISION:
As per offer documents, it has shown Ashiana Housing and Arihant Superstructures as its listed peers that are currently trading at a P/Es of around 31 and 22. Even recent IPO of Karda Construction is trading around 17 P/E. (as on 21.08.18)

MERCHANT BANKER’S TRACK RECORD:
On merchant banker’s front, this is the 4th mandate from its stable and out of last 3 listings 1 opened at discount and the rest 2 with a premium ranging from 6.06% to 12.78% on the day of listing.


Conclusion / Investment Strategy

The sudden spurt in the bottom line for FY18 raised concern. Considering the SPV model business of the company and order on hand, investors may consider an investment for long-term in this issue.

Review By Dilip Davda on Aug 22, 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

Sumit Woods IPO FAQs

  1. 1. Why Sumit Woods IPO?

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

  2. 2. How is Sumit Woods IPO?

    Read the Sumit Woods IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Sumit Woods IPO what should investors do?

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

  4. 4. Is Sumit Woods IPO good?

    Our recommendation for Sumit Woods IPO is to subscribe for long term.

  5. 5. Is Sumit Woods IPO worth Investing?

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

  6. 6. When will Sumit Woods IPO allotment status?

    The Sumit Woods IPO allotment status will be available on or around Sep 5, 2018. The allotted shares will be credited in demat account by Sep 6, 2018. Visit Sumit Woods IPO allotment status to check.

  7. 7. When will Sumit Woods IPO list?

    The Sumit Woods IPO will list on Monday, September 10, 2018, at NSE SME.