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Synergy Green BSE SME IPO review (May apply)

Review By Dilip Davda on Aug 30, 2018

•    SGIL is a Ugar Sugar group company.
•    Improved financials, but carried forward losses a major concern.
•    Issue is priced aggressively.
•    Peers are trading at lower P/Es.
•    Average track record of LM.

About Company:
Synergy Green Industries Ltd. (SGIL) is engaged in the business of foundry i.e. manufacturing of castings, industrial castings, turbine castings, metal castings, steel castings and Windmill Parts. Its manufacturing unit is situated at Kolhapur, Maharashtra. Company is from Ugar Sugar group.

Company is an ISO 9001:2015 certified for Manufacture of Graded Grey Iron, Spheroidal Graphite Iron and Steel Casting and Machined Components for Non-Automotive and Industrial Applications. It is capable to handle the castings ranging from 500 Kg to 17 MT single piece in ductile iron and grey iron. Company’s plant is equipped with MAGMA simulation software, Furan no bake moulding plant, Induction melting furnace and entire range of testing equipment’s to meet stringent quality specifications. SGIL activities consists of three segments namely Wind Turbine, Wind Gear Box and General Engineering (Non-Wind Segment) like Mining equipment, Pump and Valve Industry Plastic Injection machines, traction motors and small casting.

Issue Details/Capital History:
To part finance its plans for purchase of plant and machinery, working capital and general corpus fund needs, SGIL is coming out with a maiden IPO of 3780000 equity shares of Rs. 10 each at a fixed price of Rs. 70 per share to mobilize Rs. 26.46 cr. Issue opens for subscription on 04.09.18 and will close on 07.09.18. Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue is solely lead managed by Swastika Investmart Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue. Issue constitutes 26.75% of the post issue paid up capital of the company. Having issued initial equity at par, it raised fresh equity at a price of Rs. 60 per share (350000 shares in February 2018). Average cost of acquisition of shares by the promoters is Rs. 10.00, Rs. 10.27, Rs. 10.33 and Rs. 52.54 per share. Post issue, its current paid up equity capital of Rs. 10.35 cr. will stand enhanced to Rs. 14.13 cr. SGL also has other equity (Non-Cumulative Redeemable Preference shares) to the tune of Rs. 10.71 cr.

Financial Performance:
On performance front, for last five fiscals, SGIL has posted turnover/net profits of Rs. 37.24 cr. / Rs. – (9.02) cr. (FY14), Rs. 63.85 cr. / Rs. – (6.85) cr. (FY15), Rs. 82.60 cr. / Rs. 1.55 cr. (FY16), Rs. 120.67 cr. / Rs. 4.86 cr. (FY17) and Rs. 103.13 cr. / Rs. 4.66 cr. (FY18). No doubt it’s earnings turned positive from FY16, as on 31.03.18 it still has negative reserves due to losses of FY14 and FY15. For FY18 it suffered a setback in top and bottom lines. For last three fiscals it has posted an average EPS of Rs. 7.24 and an average RoNW of 26.01%. Issue is priced at a P/BV of 5.24 on the basis of its NAV of Rs. 13.37 as on 31.03.18 and at a P/BV of 2.79 on the basis of post issue NAV of Rs. 25.07. If we consider latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 21 plus. Thus issue is fully priced on the basis of its track record so far. Although the industry average P/E is around 37, this issue with negative reserves as on 31.03.18 sounds expensive.  

Listed Peers comparisons:
As per offer documents it has shown Kalyani Forge and Ramkrishna Forging as its listed peers that are currently trading at a P/Es of around 17 and 20. (As on 30.08.18).

Merchant Banker’s track records:
On merchant banker’s front, this is the 17th mandate from its stable in last three years. Out of last 10 listings, 2 opened at discount and the rest with a premium ranging from 1.637% to 20% on the day of listing.


Conclusion / Investment Strategy

Although company’s working has turned positive since last three fiscals, it has yet carried forward losses in the balance sheet. Asking price is aggressive compared to its peers. Hence risk savvy cash surplus investors may consider it for long term.

Review By Dilip Davda on Aug 30, 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

Synergy Green IPO FAQs

  1. 1. Why Synergy Green IPO?

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

  2. 2. How is Synergy Green IPO?

    Read the Synergy Green IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Synergy Green IPO what should investors do?

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

  4. 4. Is Synergy Green IPO good?

    Our recommendation for Synergy Green IPO is to subscribe for long term.

  5. 5. Is Synergy Green IPO worth Investing?

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

  6. 6. When will Synergy Green IPO allotment status?

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

  7. 7. When will Synergy Green IPO list?

    The Synergy Green IPO will list on Friday, September 21, 2018, at BSE SME.