Soni Soya NSE SME IPO review (May apply)

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Review By Dilip Davda on March 21, 2018

Soni Soya Products Ltd. (SSPL) is  engaged in the business of processing and trading of organic and Non- genetically modified organisms (non-GMO) agricultural products such as Soya, Maize ( Corn), Wheat, Flax seeds and Mustard, Oil, Rice, Pulses, Herbs, Spices, and other grains. It is  registered with U.S. Food and Drug Administration pursuant to the Federal Food Drug Cosmetic Act, as amended by the Bioterrorism Act of 2002 and the FDA Food Safety Modernization Act and with Agricultural and Processed Food Products Export Development Authority of Government of India (APEDA) to export such scheduled products as per APEDA Act, 1985. Apart from these, it is accredited with other various certifications namely, National Programme for Organic Production(NPOP), India and the National Organic Program (NOP) technical standards (USA) and INDOCERT Organic Standard for Non - EU Country Operators. SSPL’s customer base is spread across the globe with presence in countries like Canada, Dubai, South Korea,Sri Lanka, United States of America. The majority of sales revenues are through direct exports which contributed 97.71%, 82.05% and 67.84% respectively to total sales revenue for the financial year ended March 31, 2015, 2016, and 2017 respectively.

To part finance its working capital and general corpus fund needs, SSPL is coming out with a maiden IPO of 1800000 equity shares of Rs. 10 each with a fixed price of Rs. 25 per share to mobilize Rs. 4.50 crore. Issue opens for subscription on 28.03.18 and will close on 04.04.18. Minimum application is to be made for 6000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Issue constitutes 34.92% of the post issue paid up capital of the company. Issue is solely lead managed by Pantomath Capital Advisors Pvt. Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Having issued initial equity at par, it raised further equity in the price range of Rs. 25 to Rs. 250 per share. It has also issued bonus shares in the ratio of 15 for 1 in August 2017. Average cost of acquisition of shares by the promoters is Rs. 10.13 and Rs. 10.34 per share. Post issue, SSPL’s current paid up equity capital of Rs. 3.36 cr. will stand enhanced to Rs. 5.16 cr.

On performance front, SSPL has posted turnover/net profits of Rs. 8.00 cr. / Rs. 0.21 cr. (FY15), Rs. 15.19 cr. / Rs. 0.08 cr. (FY16), Rs. 28.77 cr. / Rs. 0.50 cr. (FY17). For first half of current fiscal it has earned net profit of Rs. 0.75 cr. on a turnover of Rs. 35.22 cr. which is surprising. Rising turnover with inconsistency in bottom line is a major concern. For last three fiscals it has posted an average EPS of Rs. 1.40 and an average RoNW of 27.83%.  Issue is priced at a P/BV of 1.51 on the basis of its NAV of Rs. 16.59 as on 30.09.17 and at a P/BV of 1.38 on the basis of its post issue NAV of Rs. 18.16. If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 9 against industry average of 24. It has shown Ruchi Soya, LT Foods, Gokul Agro, Kriti Nutri, Shanti Overseas and Sanwaria Consumer as its listed peers which are trading at a P/E of around –(0.09),58,19,18,7 and 11 (as on 21.03.118 closing on BSE). Issue appears fully priced if we consider nearest peers like Ruchi, Shanti and Sanwaria.

On merchant banker’s front, this is 67th mandate from its stable in last three fiscals. Out of last 10 listings, 1 opened at discount to offer price, 1 just Rs. 0.05 paisa up on offer price, 7 with a premium ranging from 4% to 20% and 1 (main board issue) with a premium of 130% on the offer price on the day of listing.

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