Jeena Sikho NSE SME IPO review (May apply)

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Review By Dilip Davda on March 27, 2022

•    JSLL is a healthcare company alternative medical system i.e. Ayurvedic.
•    It has posted higher margins for the recent two fiscals. 
•    Based on its super earnings, the issue is fully priced. 
•    Risk seeker/cash surplus investors may consider parking of funds. 

ABOUT COMPANY: 
Jeena Sikho Lifecare Limited (JSLL) is an ayurvedic healthcare company headquartered in Zirakpur, Punjab. Founded by Mr Manish Grover (popularly known as Acharya Manish) in the year 2017, the main motive of the Company is to build a healthy India through preventive measures by providing authentic and good quality ayurvedic products.

JSLL is operating 150+ Ayurvedic Clinic in 23 states, out of the 9 clinics are owned & operated by it and the rest of the clinics are operated by franchisee partners on a commission basis & to maintain quality, it is mandatory for all the franchisees to follow JSLL's standard operating procedure (SOPs) issued by it from time to time. The company has a wide range of ayurvedic products. 

Ayurveda is an alternative medical system with historical roots in the Indian subcontinent. The origin of Ayurveda dates back to the Vedic era. It was developed more than 3,000 years ago in India. It's based on the belief that health and wellness depend on a delicate balance between the mind, body, and spirit. Its main goal is to promote good health, not fight disease. Ayurvedic theory states that all areas of life impact one's health, so it follows that the Vedas cover a wide variety of topics, including health and healthcare techniques, astrology, spirituality, government and politics, art, and human behaviour.

Jeena Sikho Lifecare is a developing health care product & services provider in India. The company has a portfolio of over a wide range of Ayurvedic products. The company also conducts various health checkup camps, yoga sessions free of cost to make people aware of their health problems. As of December 31st, 2021, Company had 1226 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY: 
To part finance its needs for marketing and sales promotion for its brand "Shuddhi" (Rs. 15.00 cr.), repayment of short term debt (Rs. 6.35 cr.) working capital (Rs. 23.10 cr.) and general corporate purpose (Rs. 10.45 cr.), JSLL is coming out with a maiden IPO of 3700000 equity shares of Rs. 10 each at a fixed price of Rs. 150 per share to mobilize Rs. 55.50 cr. The issue opens for subscription on March 30, 2022, and will close on April 07, 2022. Minimum application is to be made for xxx shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.79% of the post issue paid-up capital of the company. JSLL is spending Rs. 0.60 cr. for this IPO process. 

The issue is solely lead managed by Fast Track Finsec Pvt. Ltd. and Skyline Financial Services Pvt. Ltd. is the registrar to the issue. Prabhat Financial Services Ltd. is the market maker for this company. 

Having issued initial equity shares at par, the company issued further equity shares at a fixed price of Rs. 1367 per share in February 2021. It has also issued bonus shares in the ratio of 90 for 1 in August 2021. Thus it emptied the coffer before IPO. The average cost of acquisition of shares by the promoters is Rs. 0.11 per share. 

Post-IPO, JSLL's current paid-up equity capital of Rs. 10.11 cr. (10111192 shares) will stand enhanced to Rs. 13.81 cr. (13811192 shares). Based on the IPO pricing, the company is looking for a market cap of Rs. 207.17 cr. 

FINANCIAL PERFORMANCE: 
On the financial performance front, for the last three fiscals, JSLL has posted turnover/net profits of Rs. 105.88 cr. / Rs. 6.00 cr. (FY19), Rs. 95.17 cr. / Rs. 5.73 cr. (FY20) and Rs. 136.87 cr. / Rs. 10.16cr. (FY21). For the first six months of FY22 that ended on September 30, 2021, it earned a net profit of Rs. 6.22 cr. on a turnover of Rs. 72.52 cr. Improved net profits for FY21 and H1FY22 raises eyebrows. 

For the above reported period, the company has posted an average EPS of Rs. 7.26 and an average RoNW of 37.23%. The issue is priced at a P/BV of 4.80 based on its NAV of Rs. 31.27 as of September 30, 2021, and at a P/BV of 2.38 based on its post-IPO NAV of Rs. 63.08. 

If we annualize FY22 super earnings and attribute it to the fully diluted post IPO equity capital, then the asking price is at a P/E of 16.67. Thus the issue is fully priced on the basis of bumper results of FY22 and if we attribute FY21 earnings then the P/E stands at 20.40. 

DIVIDEND POLICY:
The company has not declared any dividend for any financial year so far. 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, JSLL has shown Kerala Ayurved as its listed peer. It is currently trading at a P/E of 00 (as of March 25, 2022). However, they are not truly comparable on an apple-to-apple basis. 

MARCHANT BANKER'S TRACK RECORDS:
Data on Merchant Banker's track records are missing in the offer document. However, as per our website, this is the 6th mandate from Fast Track in the last three fiscals. Out of the last 5 listings, two opened at discount and the rest with premiums ranging from 0.83% to 12.61% on the day of listings.

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