White Organic Retail BSE SME IPO review (Subscribe for Long Term)

Review By Dilip Davda on Apr 20, 2019

•    This is the second company of "White" group to tap market after 1995.
•    WORL deals in agro trading and retailing.
•    It has posted super performance for FY18 and 9MFY19.
•    Based on financial parameters, the issue appears attractively priced.
•    LM has an average track record.

ABOUT COMPANY:
White Diamond Ltd. which is a BSE listed company and changed its name in February 2017 to White Organic Agro Ltd. is now coming with other group company IPO of White Organic Retail Ltd. (WORL) (Formerly known as Sapna Infraventure Private Limited). The company was originally promoted for real estate business diversified in 2016 for trading in agricultural products including organic and other products. It also ventured into retailing of the same. Currently, it is trading in Agriculture produce like Cereals, Pulses, Grains, Fruits and Vegetables.

The management has launched the franchisee module for the retail network. In the first phase of expansion the company is looking to set up 40+ retail outlets across Mumbai, Pune, Nasik, Ahmedabad,
Surat, Vadodara, Rajkot. With the help of these distribution network/franchisee model, the management is very optimistic for the value addition and sales growth of the company.

The Company is planning for introducing a wide range of products like; Cow Ghee, Jaggery and Moringa, Sweeteners, Juices, Beauty Products, Snacks, Syrups, Health Powders, Churans, Mukhwas, Incense Sticks, Soap, Aloe Vera Juices, Aloe Vera Gel etc. The company is also planning to launch the capsule range like Amla, Haldi, Jvara etc and medicinal and nutritional powders like Amla, Ashwagandha, Gokharu, Moringa, Rasayan etc. E-Commerce integrated solutions for the Brand "White Organic" is also underway.

White Organic Agro (erstwhile White Diamond) got listed in 1995 and has since then seen a high of Rs. 138.50 (in 2018) and low of Rs. 0.70 (in 1997) is currently trading around Rs. 24 (for Rs. 10 FV).

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its working capital (Rs. 12.51 cr. ) and general corpus fund needs (Rs. 2.00 cr.), WORL is coming out with an IPO of 2454000 equity shares of Rs. 10 each at a fixed price of Rs. 63 per share to mobilize Rs. 15.46 cr. The issue opens for subscription on 26.04.19 and will close on 02.05.19. Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue constitutes 44.99% of the post issue paid up capital of the company. WORL is spending Rs. 0.95 cr. to raise money from this IPO.

The issue is solely lead managed by Finshore Management Services Ltd. while Link Intime India Pvt. Ltd. is the registrar to the issue. Moneylicious Securities Pvt. Ltd. is acting as a market maker for the issue.  Having issued initial equity at par, it converted the loan into equity at Rs.63 per share in August 2018. It has also issued bonus shares in the ratio of 71 for 1 in July 2018. The average cost of acquisition of shares by the promoters is Rs. 10 and Rs.47.91 per share. Post issue, WORL's current paid up equity capital of Rs. 3.00 cr. will stand enhanced to Rs. 5.45 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, WORL has posted turnover/net profits of Rs. 1.07cr. / Rs. 0.24 cr. (FY16), Rs. 2.55 cr. / Rs. 0.59 cr. (FY17) and Rs. 84.00 cr. / Rs. 3.02 cr. (FY18). For the first nine months of FY19, it has earned a net profit of Rs. 4.51 cr. on a turnover of Rs. 116.35 cr. The sudden spurt in the top and bottom lines for FY18 and 9MFY19 raises eyebrows.

The company has (in last three fiscals) posted an average EPS of Rs.24.27 and an average RoNW of 51.46%. The issue is priced at a P/BV of 0.81 on the basis of its NAV of Rs. 77.89 as on 31.12.18 and at a P/BV of 0.88 on the basis of post issue NAV of Rs. 71.19.

If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 5.71, thus the issue is priced attractively based on its super performance and other parameters like P/BV.

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

MERCHANT BANKER'S PERFORMANCE:
On merchant banker's front, this is the 11th mandate from its stable. Out of last 10 listings, 3 opened at discount, 1 at par and the rest with premiums ranging from 0.02% to 20.66% on the day of listing. Thus it has an average track record.


Conclusion / Investment Strategy

Based on the financial parameters and recent performance, the issue appears attractively priced. Super performance for FY18 and 9MFY19 raises eyebrows. Group's tendency to change business model raises concern. Considering future plans, investors may consider investment for the long term.

Reviewer recommends Subscribing to the issue for Long Term.

Review By Dilip Davda on Apr 20, 2019

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

White Organic IPO FAQs

  1. 1. Why White Organic IPO?

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

  2. 2. How is White Organic IPO?

    Read the White Organic IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. White Organic IPO what should investors do?

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

  4. 4. Is White Organic IPO good?

    Our recommendation for White Organic IPO is to subscribe for long term.

  5. 5. Is White Organic IPO worth Investing?

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

  6. 6. When will White Organic IPO allotment status?

    The White Organic IPO allotment status will be available on or around May 7, 2019. The allotted shares will be credited in demat account by May 9, 2019. Visit White Organic IPO allotment status to check.

  7. 7. When will White Organic IPO list?

    The White Organic IPO will list on Friday, May 10, 2019, at BSE SME.

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