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Review By Dilip Davda on August 19, 2023
• SEL is engaged in the manufacturing of solar inverters, storage products, power electronics etc.
• It has posted an average financial performance so far.
• Boosted top line with static bottom line raises eyebrows.
• A tiny equity capital post-IPO indicates a longer gestation period.
• The IPO appears fully priced discounting all near-term positives.
• Well-informed investors may park funds for the long term.
PREFACE:
In the arena of madness seen for the SME IPOs, everybody wants to hit when the iron is hot. We have this company i.e. Sungarner Energies Ltd. which is opening its SME IPO on August 21, 2023, but till the eve of August 19, 2023 (at 17.06 hrs.), its prospectus was not available on the designated stock exchange as well as on the website of Lead Manager. This is how things have started taking shape and no compliances are observed. Ultimately it was found on the Company's website to understand the pros and cons of the IPO to present the review.
ABOUT COMPANY:
Sungarner Energies Ltd. (SEL) at the start of its Journey, was a Design Engineering and Solar EPC company and gradually company also diversified into Manufacturing Power Electronics and Energy Storage Products. Today Sungarner Energies Limited is also into manufacturing Solar Inverters, Online UPS Systems, EV Chargers, and Lead Acid Batteries. Sungarner has also obtained WMI code for the manufacturing of EV Vehicles.
SEL produces lead acid batteries of varying capacities in the range from 12 Volts 40 ampere-hours to 12 volts 300 ampere-hours. It has already established a distribution network in some of the key markets like Haryana, UP, Bihar, Rajasthan, and Assam. The company today has 6 (six) service Centres in India - Delhi, UP Haryana, Bihar Assam, and Bengal. It is in the process of expanding its footprint further by appointing an additional 500 Franchisees to cover all major Districts of India by the end of 2025.
Sungarner Solar EPC Division has to date commissioned more than 50 (fifty) large Solar Projects in the last 8 years. Some of the prestigious projects that commissioned are for customers like Interglobe Enterprises, DLF, Jubilant Life Sciences, Eli Lilly, Modi Xerox, V N Dyers and Textiles, The ITC Hotels Delhi, etc.
It is also an integrated solar energy solutions provider offering engineering, procurement and construction ("EPC") services. Its services include the design, engineering & implementation of solar Off Grid and on Grid Power Plants. As of August 01, 2023, it had 54 employees on its payroll.
ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden IPO of 640000 equity shares of Rs. 10 each at a fixed price of Rs. 83 per share to mobilize Rs. 5.31 cr. The issue opens for subscription on August 21, 2023, and will close on August 23, 2023. The minimum application to be made is for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME. The issue constitutes 27.60% of the post-IPO paid-up equity capital of the company. The company is spending Rs. 0.70 cr. for this IPO process and from the net proceeds, it will utilize Rs. 3.50 cr. for working capital and Rs. 1.11 cr. for general corporate purposes.
Fast Track Finsec Pvt. Ltd. is the sole lead manager and Skyline Financial Services Pvt. Ltd. is the registrar of the issue. Nikunj Stock Brokers Ltd. is the market maker for the company.
Having issued initial equity shares at par, the company issued/converted further equity shares at a price of Rs. 40 per share between September 2022 and October 2022. It has also issued bonus shares in the ratio of 7 for 4 in September 2022. The average cost of acquisition of shares by the promoters is Rs. 3.64, and Rs. 6.07 per share.
Post-IPO, SEL's current paid-up equity capital of Rs. 1.68 cr. will stand enhanced to Rs. 2.32 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 19.25 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, SEL has posted a turnover/net profit of Rs. 5.36 cr. / Rs. 0.16 cr. (FY21), Rs. 7.98 cr. / Rs. 0.58 cr. (FY22), and Rs. 17.65 cr. / Rs. 0.74 cr. (FY23). The sudden boost in its top line for FY23, a pre-IPO year, raised eyebrows, while its bottom lines presented pressure on margins.
For the last three fiscals, SEL has reported an average EPS of Rs. 7.36 and an average RoNW of 25.36%. The issue is priced at a P/BV of 4.35 based on its NAV of Rs. 19.09 as of March 31, 2023, and at a P/BV of 2.26 based on its post-IPO NAV of Rs. 36.73 per share.
If we attribute FY23 earnings to SEL's post-IPO paid-up capital, then the asking price is at a P/E of 25.94. Thus the issue appears fully priced discounting all near-term positives.
DIVIDEND POLICY:
The company has not declared any dividend so far. It will adopt a prudent dividend policy based on its financial performance and future prospects.
COMPARISON WITH LISTED PEERS:
As per the offer document, SEL has shown Insolation Energy, Veer Energy, and V Guard Ind. as their listed peers. They are currently trading at a P/E of around 86.83, 13.19, and 74.41 (as of August 18, 2023). However, they are not truly comparable on an apple-to-apple basis.
MERCHANT BANKER'S TRACK RECORD:
This is the 9th mandate from Fast Track in the last six fiscals (including the ongoing one). Out of the last 8 listings, 2 opened at discount, 1 at par and the rest with premiums ranging from 6.72% to 27.93% on the listing date.
Review By Dilip Davda on August 19, 2023
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. My reviews do not cover GMP market and operators game plans. Readers must consult a qualified financial advisor before making any actual investment decisions, based the on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the recent past, SME IPOs drew the attention of investors across the board and lead to seer madness. 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 their own risk. The above information is based on information available as of date coupled with market perceptions. The Author has no plans to invest in this offer.
About 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.
(Dilip Davda -SEBI registered Research Analyst-Mumbai,
Registration no. INH000003127 (Perpetual)
Email id: dilip_davda@rediffmail.com ).
The initial public offer (IPO) of Sungarner Energies Limited offers an early investment opportunity in Sungarner Energies Limited. A stock market investor can buy Sungarner Energies IPO shares by applying in IPO before Sungarner Energies Limited shares get listed at the stock exchanges. An investor could invest in Sungarner Energies IPO for short term listing gain or a long term.
Read the Sungarner Energies IPO recommendations by the leading analyst and leading stock brokers.
Sungarner Energies IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Sungarner Energies IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.
Our recommendation for Sungarner Energies IPO is to subscribe for long term.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Sungarner Energies IPO.
The Sungarner Energies IPO allotment status will be available on or around August 28, 2023. The allotted shares will be credited in demat account by August 30, 2023. Visit Sungarner Energies IPO allotment status to check.
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