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Review By Dilip Davda on June 10, 2023
• CCL is in the business of manufacturing/supplying cold-rolled stainless sections for Rail infrastructures and wagon manufacturers.
• It has posted just two years' financial performance.
• Boosted performance for FY23, i.e. pre-IPO year raise eyebrows.
• The issue is greedily priced discounting all near-term positives.
• There is no harm in skipping this pricey bet.
ABOUT COMPANY:
Cosmic CRF Ltd. (CCL) is a qualified and an RDSO approved supplier of cold-rolled stainless sections to renowned wagon manufacturers such as Titagarh Wagons Limited, Hindusthan Engineering & Industries Limited, Melbrow Engineering Works Private Limited, Jindal Rail Infrastructure Limited, Allied Construction Engineers & Fabricators, etc. In addition to this, the company also supplies cold rolled stainless sections to direct orders of the railways through tender procurement.
As of March 31, 2023, the total order book value of our Company is Rs. 536.41 cr. out of which orders amounting to Rs. 135.66 cr. has been executed and orders amounting to Rs. 400.74 cr. are ongoing. Further, as of March 31, 2023, CCL has completed 25 orders for the supply of cold rolled stainless sections and 23 orders are ongoing.
Pursuant to the Business Transfer Agreement dated January 19, 2022, read with the Addendum to the Business Transfer Agreement dated August 26, 2022, and September 9, 2022, CCL acquired the CRF unit of Cosmic Ferro Alloys Limited. The purchase included a manufacturing unit in West Bengal spread over an area of approximately 3.82 acres together with plant, machinery, assets and liabilities. The unit manufactures a range of cold-rolled stainless sections, such as fabricated items for railway, coach & wagons, cold-rolled formed items for wagons and coaches, cold-rolled formed items for infra companies and EPC projects and products for roadways and national highways. As of March 31, 2023, it had 29 employees on its payroll.
ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden book-building route IPO of 1822000 equity shares of Rs. 10 each with a price band of Rs. 314 -Rs. 330 per share. It mulls mobilizing Rs. 60.13 cr. at the upper cap. The issue opens for subscription on June 14, 2023, and will close on June 16, 2023. The minimum application to be made is for 400 shares and in multiples thereof, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.32% of the post-issue paid-up capital of the company. From the net proceeds of the IPO funds, it will utilize Rs. 30.00 cr. for expansion of existing unit, Rs. 10.00 cr. for working capital, Rs. 11.00 cr. for repayment/prepayment of certain borrowings and the rest for general corporate purposes.
The company has allocated 91200 shares for the market maker, 34400 shares for QIB, 398400 shares for HNIs and 1298000 shares for retail investors.
Horizon Management Pvt. Ltd. is the sole lead manager and MAS Services Ltd. is the registrar of the issue. Giriraj Stock Broking Pvt. Ltd. is the market maker of the company.
The company has issued its entire equity capital at a par value so far. The average cost of acquisition of shares by the promoters is Rs. 10.00 per share.
Post-IPO, CCL's current paid-up equity capital of Rs. 5.10 cr. will stand enhanced to Rs. 6.92 cr. Based on the upper cap of the IPO pricing, the company is looking for a market cap of Rs. 228.43 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, CCL has posted a turnover/net profit - (loss) of Rs. NIL / Rs. - (0.12) cr. (FY22), and Rs. 121.49 cr. / Rs. 6.41 cr. (FY23).
For the last two fiscals, CCL has reported an average EPS of Rs. 8.16 and an average RoNW of 25.78%. The issue is priced at a P/BV of 14.77 based on its NAV of Rs. 22.34 as of March 31, 2023, and at a P/BV of 3.19 based on its post-IPO NAV of Rs. 103.32 per share (at the upper cap).
If we attribute FY23 super earnings to post-IPO fully paid-up equity capital, then the asking price is at a P/E of around 35.64. Thus the issue is priced greedily discounting all near-term positives.
DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy post-listing, based on its financial performance and future prospects.
COMPARISON WITH LISTED PEERS:
As per the offer document, the company has no listed peers to compare with.
MERCHANT BANKER'S TRACK RECORD:
This is the 1st mandate from Horizon Management in the last two fiscals (including the ongoing one). Hence it has no track record of past mandates.
Review By Dilip Davda on June 10, 2023
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 Cosmic CRF Limited offers an early investment opportunity in Cosmic CRF Limited. A stock market investor can buy Cosmic CRF IPO shares by applying in IPO before Cosmic CRF Limited shares get listed at the stock exchanges. An investor could invest in Cosmic CRF IPO for short term listing gain or a long term.
Read the Cosmic CRF IPO recommendations by the leading analyst and leading stock brokers.
Cosmic CRF IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Cosmic CRF IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.
Our recommendation for Cosmic CRF IPO is to avoid.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Cosmic CRF IPO.
The Cosmic CRF IPO allotment status will be available on or around June 26, 2023. The allotted shares will be credited in demat account by June 29, 2023. Visit Cosmic CRF IPO allotment status to check.
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