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Ultra Wiring NSE SME IPO review (Subscribe for Long Term)

Review By Dilip Davda on Oct 7, 2018

•    UWCSL is engaged in auto electrical parts.
•    It has shown steady growth in top and bottom lines.
•    Part IPO process is going for setting up of new unit.
•    Issue appears reasonably priced.

ABOUT COMPANY:
Ultra Wiring Connectivity Systems Ltd. (UWCSL) is engaged in the business of manufacturing of couplers, connectors and allied products for automobiles with fully automatic machineries. Its client list includes Tata Motors, Bajaj Auto, Maruti Udyog, TCS Motors, Kinetic Engg., Tata Yazaki, Minda Group of Ind., Lumax Group, Fiem Industries etc.  

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its plans for setting up of new parallel production units for Connector and Blade Fuse, working capital and general corpus fund needs, UWCSL is coming out with a maiden IPO of 1376000 equity shares of Rs. 10 each at a fixed price of Rs. 35 per share. Issue opens for subscription on 12.10.18 and will close on 17.10.18.Company mulls mobilizing Rs. 4.82 cr. through this float. Minimum application is to be made for 4000 shares and in multiples thereon, thereafter. Issue constitutes 26.44% of the post issue paid up capital of the company. Post allotment, shares will be listed on NSE SME Emerge. Issue is solely lead managed by D&A Financial Services Pvt. Ltd. while Bigshare Services Pvt. Ltd. is the registrar to the issue. Having raised initial equity at par, it raised further equity at a price of Rs. 100 per share between March 2007 and June 2013. It has also issued bonus shares in the ratio of 10 for 1 in February 2018. Average cost of acquisition of shares by the promoters is Rs. 0.91 and Rs. 4.61 per share. Post issue UWCSL’s current paid up equity capital of Rs. 3.83 cr. will stand enhanced to Rs. 5.20 cr.

FINANCIAL PERFORMANCE:
On financial performance front, for last four fiscals, UWCSL has posted turnover/net profits of Rs. 12.34 cr. / Rs. 0.40 cr. (FY15), Rs. 13.94 cr. / Rs. 0.57 cr. (FY16), Rs. 15.18 cr. / Rs. 0.75 cr. (FY17) and Rs. 17.87 cr. / Rs. 1.18 cr. (FY18). Thus it has posted steady growth in top and bottom lines for these fiscals. For first two months ended on 31.05.18 of FY19 it has posted net profit of Rs. 0.24 cr. on a turnover of Rs. 3.49 cr. Issue is priced at a P/BV of 2.16 based on its NAV of Rs. 16.24 as on 31.05.18 and at a P/BV of 1.69 based on post issue NAV of Rs. 20.74. For last three fiscals, it has posted an average EPS of Rs. 2.44 and an average RoNW of 17.43%. If we annualize FY19 earnings and attribute it to fully diluted post issue equity, then asking price is at a P/E of around 13 and thus appears reasonably priced.

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

MERCHANT BANKER’S TRACK RECORD:
On merchant banker’s front, this is the 5th mandate since March 2011. However, in last three fiscals, this is the 2nd mandate and the only listing that took place during this period opened at a discount on the listing day. From 3 issued of 2011/12, on opened at a discount to offer price while the rest 2 opened with a premium ranging 10% to 13.6%. Thus it has average track record.


Conclusion / Investment Strategy

This auto ancillary segment IPO, at a reasonable value and having growing financial performance, may be considered for long term investment.

Reviewer recommends Subscribing to the issue for Long Term.

Review By Dilip Davda on Oct 7, 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 prior to making any actual investment decisions, based on information published here. With entry barriers, SEBI wants only well informed investors to participate is such offers. With crazy recent listings, SME IPOs have started drawing attention of investors across the board. However, as SME issues have entry barriers and continued low preference from broking community, any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on information available as on date coupled with market perceptions. Author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

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

The Ultra Wiring Connectivity IPO Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered IPO Analysts tells you if Ultra Wiring Connectivity IPO worth investing. The Ultra Wiring Connectivity IPO Note sets the IPO expectations in systematic way which tells you if Ultra Wiring Connectivity IPO good to buy (good or bad / yes or no). The IPO Forecast tells you weather to invest in Ultra Wiring Connectivity IPO by providing IPO recommendations i.e. subscribe, avoid and neutral.


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