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Review By Dilip Davda on August 22, 2022
• APEL is in the business of manufacturing precision components for the engineering industry.
• Its revenue includes around 98% of export earnings.
• For the last three fiscals, it posted a static top line, but the bottom line marked inconsistency.
• The issue appears fully priced based on its FY22 earnings.
• Cash surplus/risk seeker may invest with a medium to long-term perspective.
ABOUT COMPANY:
Ameya Precision Engineers Ltd. (APEL) is engaged in the manufacturing of high-end precision components (shafts, and other trim components) for the general engineering industry, but in particular valve and pump manufacturing. It also offers specialized processes like hard-facing and overlay of wear and corrosion-resistant alloys in line with ASME procedures. APEL offers an end-to-end solution from procurement of raw materials to the final dispatch of hard-facing and overlay components.
Its major customers are valve and pump manufacturers. It exports to the United States of America, the United Kingdom, Germany, Singapore, Slovenija, Austria, and Brazil. The majority of its sales are through exports which contributed 94.07%, 96.22%, and 95.72%, respectively of revenue from operations for the financial year ended March 31, 2022, 2021, and 2020. As of March 31, 2022, it had 118 employees on its payroll.
ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for capital expenditure (Rs. 0.64 cr.), working capital (Rs. 2.76 cr.), and general corporate purposes (Rs. 1.02 cr.), APEL is coming out with a maiden IPO of 2100000 equity shares of Rs. 10 each at a fixed price of Rs. 34 per share to mobilize Rs. 7.14 cr. The issue opens for subscription on August 25, 2022, and will close on August 30, 2022. It's a combo IPO of 1500000 fresh equity shares (Rs. 5.10 cr.) and an Offer for Sale of 600000 equity shares (Rs. 2.04 cr.). Minimum application is to be made for 4000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 28% of the post-issue paid-up capital of the company. APEL is spending Rs. 0.68 cr. for this IPO process.
The issue is solely lead managed by Shreni Shares Pvt. Ltd. and Skyline Financial Services Pvt. Ltd. is the registrar to the issue. Shreni Shares Pvt. Ltd. is also the market maker for this company.
After issuing initial equity at par, the company issued bonus shares in the ratio of 1 for 1 in March 2021, and in the ratio of 2 for 1 in December 2021. The average cost of the acquisition of shares by the promoters is Rs. 1.67 per share.
Post IPO, APEL's current paid-up equity capital of Rs. 6.00 cr. will stand enhanced to Rs. 7.50 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 25.50 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, APEL has reported turnover/net profits of Rs. 23.48 cr. / Rs. 1.80 cr. (FY20), Rs. 24.89 cr. / Rs. 2.73 cr. (FY21) and Rs. 23.96 cr. / Rs. 1.52 cr. (FY22). While its top line remained static, its bottom line has marked inconsistency.
For the last three fiscals, APEL has posted an average EPS of Rs. 3.28 and an average RoNW of 16.45%. The issue is priced at a P/BV of 1.51 based on its NAV of Rs. 22.51 as of March 31, 2022, and at a P/BV of 1.37 based on its post-issue NAV of Rs. 24.81 per share.
If we attribute FY22 earnings on post-issue fully diluted equity capital, then the asking price is at a P/E of 16.75.
COMPARISON WITH LISTED PEERS:
As per offer documents, APEL has shown Remsons Ind., Kranti Ind. and Atam Valves as its listed peers. They are currently trading at a P/E of 22.51, 31.37, and 63.03 (as of August 22, 2022). However, they are not truly comparable on an apple-to-apple basis.
DIVIDEND POLICY:
The company has not declared/paid any dividend for the reported periods of the offer documents. 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 13th mandate from Shreni Shares in the last three fiscals (including the ongoing one). Out of the last 10 listings, 1 opened at par and the rest with premiums ranging from 0.6% to 59.73% on the day of listings.
Review By Dilip Davda on August 22, 2022
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. My reviews do not cover GMP market and operators game plans. Readers must consult a qualified financial advisor before making any actual investment decisions, based the on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the recent past, SME IPOs drew the attention of investors across the board and lead to seer madness. 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 their own risk. The above information is based on information available as of date coupled with market perceptions. The Author has no plans to invest in this offer.
About 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.
(Dilip Davda -SEBI registered Research Analyst-Mumbai,
Registration no. INH000003127 (Perpetual)
Email id: dilip_davda@rediffmail.com ).
The initial public offer (IPO) of Ameya Precision Engineers Ltd offers an early investment opportunity in Ameya Precision Engineers Ltd. A stock market investor can buy Ameya Engineers IPO shares by applying in IPO before Ameya Precision Engineers Ltd shares get listed at the stock exchanges. An investor could invest in Ameya Engineers IPO for short term listing gain or a long term.
Read the Ameya Engineers IPO recommendations by the leading analyst and leading stock brokers.
Ameya Engineers IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Ameya Engineers IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.
Our recommendation for Ameya Engineers IPO is to subscribe for long term.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Ameya Engineers IPO.
The Ameya Engineers IPO allotment status will be available on or around September 5, 2022. The allotted shares will be credited in demat account by September 7, 2022. Visit Ameya Engineers IPO allotment status to check.
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