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Zeal Aqua SME IPO review (Avoid)

Review By Dilip Davda on Jun 25, 2016

Zeal Aqua Ltd (ZAL) is engaged in shrimp farming and also engaged in satellite farming whereby it supplies inputs i.e shrimp feeds, shrimp seeds, probiotics and other aquaculture related products etc on credit to small farmers and buys shrimps from these farmers. The Company has approx 1050 satellite farms. The satellite farming enables companies to scale up and multiply its production without putting up physical infrastructure on its own. This flexible model of shrimp production helps it to efficiently manage growing demand of shrimps. After establishing the strong foothold in the shrimp farming and satellite farming activities, as a part of forward integration ZAL is in process of setting up shrimp processing unit for their shrimp including cold storage and primarily to manufacture Individually quick frozen (IQF) shrimp products With the help of this proposed processing unit, ZAL will be in a position to directly sell the finished product (consumable shrimp) to the export market.

At present, it has approx 160 ponds spread over village Mor, Delasa, Mandorai, Cutpore, Nesh, Dandi, Olpad, Orna, Bhagwa, Udhana, etc admeasuring area of approx 200 hectares of land wherein the land on which ponds are constructed for cultivation of shrimp by the Company is in accordance with collaboration agreements with various parities.

To part finance setting up of shrimp processing unit and raise corporate general corpus, the company is coming out with a maiden IPO of 1135000 equity share of Rs. 10 each at a fixed price of Rs. 130 per share to mobilize Rs.14.76 crore. Issue opens for subscription on 27.06.16 and will close on 30.06.16. Minimum application is to be made for 1000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue is lead managed by Corporate Strategic Allianz Ltd and Bigshare Services Pvt Ltd is the registrar to the issue. After initial contribution at par in 2009, the company raised further equity between 2011 and 2013 at a price range of Rs. 50 to Rs. 200 per share and has also issued bonus shares in the ratio of 3 for 5 in March 2015. Post IPO its current paid up equity capital of Rs. 3.07 crore will stand enhanced to Rs. 4.20 crore.

On performance front, for last three fiscals the company has posted turnover and net profits of Rs. 72.26 cr./ Rs. 1.41 cr. (FY13),  Rs. 136.17 cr. / Rs. 3.50 cr. (FY14),  Rs. 171.65 cr./ Rs. 3.07 cr. (FY 15). For first nine months ended on 31.12.15 it has posted net profit of Rs.1.35 crore on a turnover of Rs. 91.58 crore. If we annualized latest earnings and attribute to post IPO equity then the asking price is at a P/E of 30 plus making it a costly bet against industry composite of around 10. Its margins have come down in last two years as appears in performances.

On merchant banker’s front, this is 6th IPO from its stable and has poor track record for past mandates.


Conclusion / Investment Strategy

Being aggressively priced IPO, only risks aver cash surplus investors may consider investment for long term.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Jun 25, 2016

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

Zeal Aqua IPO FAQs

  1. 1. Why Zeal Aqua IPO?

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

  2. 2. How is Zeal Aqua IPO?

    Read the Zeal Aqua IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Zeal Aqua IPO what should investors do?

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

  4. 4. Is Zeal Aqua IPO good?

    Our recommendation for Zeal Aqua IPO is to avoid.

  5. 5. Is Zeal Aqua IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Zeal Aqua IPO.

  6. 6. When will Zeal Aqua IPO allotment status?

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

  7. 7. When will Zeal Aqua IPO list?

    The Zeal Aqua IPO will list on Thursday, July 7, 2016, at BSE SME.