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Review By Dilip Davda on May 28, 2019
ABOUT COMPANY:
Suich Industries Ltd. (SIL) was originally incorporated as Delhi Fone N Battery Pvt. Ltd. in 2008 and then changed its name to current one in February 2018. Initially, it was engaged in the manufacturing of mobile phone batteries and chargers. Over the period it expanded its activities and started importing and assembling Power Banks and LED TV Sets. SIL is selling all these products under its own brand 'SUICH'. It is marketing these products in Tier-2 and Tier-3 cities and rural areas of Northern Regions. IN 2012 it started manufacturing of Power Banks, launched featured mobile phones in 2014 and LED TV Sets in 2016. Off late it has ventured into the export market for its products. SIL is also trading third-party products in similar categories. The company has set up its own R & D facility to expand its product portfolio with innovations. Currently, SIL is one of the mobile phone accessories and consumer electronics manufacturers and marketers.
Company's capacity utilization is very low across the product line and trade receivables for FY18 were 6 months raises concern. According to management, this was due to the working capital constraint. As the company focuses on pocket-friendly (affordable) mobile accessories products that have better margins, they are confident of maintaining the margin level of around 7-8% going forward. Availability of additional working capital from issue proceeds pave the way for higher capacity utilization as well as new product launches that are up to the sleeves. According to data mobile accessories market is expected to grow at a CAGR of around 10% till 2026.
ISSUE DETAILS/CAPITAL HISTORY:
To part finance its plans for repayment/prepayment of certain unsecured loans (Rs. 1.13 cr.), working capital (Rs. 23.50 cr.) and general corpus fund. SIL is coming out with a maiden IPO of 4115200 equity shares of Rs. 10 each via book building route. It has fixed a price band of Rs. 73-Rs. 75 per share and mulls mobilizing Rs. 30.04 cr. – Rs. 30.86 cr. (based on lower and upper price bands). The issue opens for subscription on 30.05.19 and will close on 04.06.19. Minimum application is to be made for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue constitutes 27% of the post issue paid up capital of the company. The issue is solely lead managed by Pantomath Capital Advisors Pvt. Ltd. while Link Intime India Pvt. Ltd. is the registrar to the issue. Pantomath Stock Brokers Pvt. Ltd. is the market maker for this issue.
Having issued initial equity at par, SIL raised further equity in the price range of Rs. 17 and Rs. 21 between March 2014 and March 2015. Promoters sold 500000 shares at Rs. 72 per share to incoming new investors in pre-IPO placement on 19.02.2019.
The average cost of acquisition of shares by the promoters is Rs. 10.64and Rs. 12.64 per share.
Post issue SIL's current paid up equity capital of Rs. 11.13 cr. will stand enhanced to Rs. 15.24 cr.
FINANCIAL PERFORMANCE
On the financial performance front, for the last three fiscals, on a consolidated basis, SIL has posted turnover/net profits of Rs. 106.58 cr. / Rs. 3.01 cr. (FY16), Rs. 144.37 cr. / Rs.5.33 Cr. (FY17) and Rs. 202.79 cr. / Rs. 7.43 cr. (FY18). For the nine months ended on 31.12.18, it has reported a net profit of Rs. 11.48 cr. on a turnover of Rs. 140.16 cr. Thus jump is bottom lines for the past one and half year raises concern as industry leaders too are not showing such robust margins.
For the last three fiscals, it has reported an average EPS of Rs. 5.38 and an average RoNW of 16.45%. The issue is priced at a P/BV of 1.61 on the basis of its NAV of Rs. 46.48 as on 31.12.18 (based on upper price band).
For FY16 to 9MFY19, it has posted CAGR of 38% in revenue and 57% CAGR in profit after tax. Its debt: equity ratio as on 31.12.18 is 0.67.
If we annualize latest earnings and attribute it to fully diluted equity post issue, then asking price is at a P/E of around 7.5 making it a lucratively priced offer based on restated net profits. On full FY18 earnings, the asking price is at a P/E of 15.36.
However, the sustainability of such performance/margins going forward in a highly competitive segment raises concern.
COMPARE WITH LISTED PEERS
As per offer documents, it has shown Dixon Techno as its listed peer which is currently trading at a P/E of around 49 (as on 28.05.19). However, it is not strictly comparable on an apple to apple basis.
MERCHANT BANKER'S TRACK RECORD
On merchant banker's front, this is the 57th mandate from its stable in the last three fiscals. Out of the last 10 listings, all issues opened at premiums ranging from 1.17% to 11.11% on the day of listings.
No doubt issue is priced lucratively. But longer trade receivable period and sustainability of margins in a highly competitive segment are a major concern. Hence cash surplus risk savvy investors may consider long term investment at their own risk.
Review By Dilip Davda on May 28, 2019
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 Suich Industries Limited offers an early investment opportunity in Suich Industries Limited. A stock market investor can buy Suich Industries IPO shares by applying in IPO before Suich Industries Limited shares get listed at the stock exchanges. An investor could invest in Suich Industries IPO for short term listing gain or a long term.
Read the Suich Industries IPO recommendations by the leading analyst and leading stock brokers.
Suich Industries IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Suich Industries IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.
Our recommendation for Suich Industries 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 Suich Industries IPO.
The Suich Industries IPO allotment status will be available on or around June 10, 2019. The allotted shares will be credited in demat account by June 12, 2019. Visit Suich Industries IPO allotment status to check.
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