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Tapi Fruit NSE SME IPO review (Avoid)

Review By Dilip Davda on Sep 7, 2022

•    TFPL is a food processor with a variety of products in its basket.
•    Its financial performance is just average with thin margins.
•    Based on FY22 earnings, the issue is exorbitantly priced. 
•    There is no harm in skipping this pricy issue. 

ABOUT COMPANY:
Tapi Fruit Processing Ltd. (TFPL) is a food processor and has products like Candied Fruit, Fruit Jellies, Chutneys & Sauces, Beverages, Nutraceuticals, and others. While children are the target audience for Candied Fruit and Jellies, other products are meant for all consumer segments. 

The company sells its products under the brand name "TAPI". "MumMum" and "Boleto". 

During the Financial Year ended March 31, 2022, it distributed products across 28 states and Union Territories in India, through its widespread network of 60 super-stockist. It also exported products, through a network of 5 merchant exporters, under its brand as well as under third-party private labels during the Financial Year ended March 31, 2022. As of July 26, 2022, the Company had 81 permanent employees on its payroll.

Though the company is from Surat, "Tapi" included in its name does not pertain to the river Tapi but denotes Towards Agro Products Innovations. Hence investors should not get carried away by such fancy names. 

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its need for repayment/prepayment of certain borrowings (Rs. 1.35 cr.), working capital (Rs. 1.96 cr.), and general corporate purposes (Rs. 1.15 cr.), TFPL is coming out with a maiden IPO of 1086000 equity shares of Rs. 10 each at a fixed price of Rs. 48 per share to mobilize Rs. 5.21 cr. The issue opens for subscription on September 12, 2022, and will close on September 14, 2022. 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 constitutes 27.75% of the post-issue paid-up capital of the company. TFPL is spending Rs. 0.75 cr. for this IPO process. Higher spending indicates a fully structured arrangement for the IPO funding. 

The issue is solely lead managed by Fedex Securities Pvt. Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Pure Broking Pvt. Ltd. is the market maker for this company. 

Having issued initial equity shares at par, the company converted further equity shares at a fixed price of Rs. 48 per share in June 2022. It has also issued bonus shares in the ratio of 277 shares for every 100 shares held in June 2022. The average cost of acquisition of shares by the promoters is Rs. 8.56 and Rs. 9.92 per share. 

Post-IPO, TFPL's current paid-up equity capital of Rs. 2.83 cr. will stand enhanced to Rs. 3.91 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 18.79 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, TFPL has posted turnover/net profits-(loss) of Rs. 11.46 cr. / Rs. - (0.01) cr. (FY20), Rs. 13.13 cr. / Rs. 0.10 cr. (FY21) and Rs. 15.22 cr. / Rs. 0.16 cr. (FY22). 

For the last three fiscals, TFPL has reported an average EPS of Rs. 1.17 and an average RoNW of 29.53%. The issue is priced at a P/BV of 10.53 based on its NAV of Rs. 4.56 as of March 31, 2022, and at a P/BV of 1.73 based on its post-IPO NAV of Rs. 27.82 per share.  

If we attribute FY22 earnings on post IPO fully diluted equity capital, then the asking price is at a P/E of 120, making it an exorbitantly priced IPO. 

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

DIVIDEND POLICY:
The company has not paid/declared any dividend since its inception. It will adopt a prudent dividend policy post-listing based on its financial performance and future prospects. 

MERCHANT BANKER'S TRACK RECORD:
This is the 11th mandate from Fedex Securities in the last three fiscals (including the ongoing one). Out of the last 10 listings, 3 opened at par and the rest with premiums ranging from 0.08% to 1.93%. Thus it has an average track record. 


Conclusion / Investment Strategy

The company has posted average financial performance with pressure on margins. Based on its FY22 earnings, the issue is exorbitantly priced. Higher issue expenses show funding arrangements ahead of IPO. A lower equity capital base post IPO indicates a longer gestation period for migration. There is no harm in giving this pricy issue a - MISS.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Sep 7, 2022

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

Tapi Fruit Processing IPO FAQs

  1. 1. Why Tapi Fruit Processing IPO?

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

  2. 2. How is Tapi Fruit Processing IPO?

    Read the Tapi Fruit Processing IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Tapi Fruit Processing IPO what should investors do?

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

  4. 4. Is Tapi Fruit Processing IPO good?

    Our recommendation for Tapi Fruit Processing IPO is to avoid.

  5. 5. Is Tapi Fruit Processing IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Tapi Fruit Processing IPO.

  6. 6. When will Tapi Fruit Processing IPO allotment status?

    The Tapi Fruit Processing IPO allotment status will be available on or around Sep 19, 2022. The allotted shares will be credited in demat account by Sep 21, 2022. Visit Tapi Fruit Processing IPO allotment status to check.

  7. 7. When will Tapi Fruit Processing IPO list?

    The Tapi Fruit Processing IPO will list on Thursday, September 22, 2022, at NSE SME.

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