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Review By Dilip Davda on September 25, 2018
• SRL is in trading of edible oil segment.
• Business is of high volume/low margin scenario.
• Oil trading is highly competitive business.
• Issue is priced exorbitantly.
ABOUT COMPANY:
Sun Retail Ltd. (SRL) is engaged in the business of trading into refined/filtered edible oils. Its major products include cottonseed oil, groundnut oil, sunflower oil. The company also performs activity of bulk trading of palmolein oil and soyabean oil. Products are sold under the brand name of 'Dharti' and 'Dharti SingTel'. The brand is well known and accepted by the people of Gujarat. The company offers refined/filtered edible oil in different packing size ranging from 15kg tin containers, 15 Litre jars, 5 Litre jars, 2 Litre jars, 1 Litre bottle, 1 Litre pouch, 500 ml bottle and 500 ml pouch. SRL purchase refined/filtered oils from the local oil refineries as per needed specification and requirements and subsequently, it is sold to Kanel Industries Limited for re-filtration and thereafter the final product is packed into tin containers, jars, bottles or pouches of different sizes as per our requirements.
ISSUE DETAILS/CAPITAL HISTORY:
To part finance its working capital and general corpus fund needs, SRL is coming out with a maiden IPO of 4398000 equity shares of Rs. 10 each at a fixed price of Rs. 23 per share. The company mulls mobilizing Rs. 10.12 cr. from this float. Issue opens for subscription on 27.09.18 and will close on 03.10.18. Minimum application is to be made for 6000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue constitutes 45.35% of the post issue paid up capital of the company. Issue is solely lead managed by Fedex Securities Ltd. while Bigshare Services Pvt. Ltd. is the registrar to the issue. It has issued/converted its equity at par since inception. It has collected Rs. 13 per share extra from one of the promoter in January 2018 for 1000000 shares which has been shown separately on page 39 to 41 of the offer document. Average cost of acquisition of shares by the promoters is Rs.12.45 per share. Post issue SRL’s current paid up capital of Rs. 5.30 cr. will stand enhanced to Rs. 9.70 cr.
FINANCIAL PERFORMANCE:
On performance front, for last four fiscals, SRL has posted turnover/net profits of Rs. 23.10 cr. / Rs. 0.01 cr. (FY15), Rs. 25.63 cr. / Rs. 0.04 cr. (FAY16), Rs. 68.06 cr. / Rs. 0.19 cr. (FY17) and 65.32 cr. / Rs. 0.23 cr. (FY18). Sudden jump in top line for FY17 and FY18 a bit surprising. Issue is priced at a P/BV of 1.77 based on its NAV of Rs. 12.97 as on 31.03.18 and at a P/BV of 1.31 based on post issue NAV of Rs. 17.52. For last three fiscals, SRL has posted an average EPS of Rs. 1.21 and an average RoNW of 7.47. If we consider FY18 earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 95 plus. Thus it is exorbitantly priced. SRL is in highly competitive business that has high volume/low margin scenario.
PEERS COMPARISION:
As per offer documents, it has shown Oasis Tradelink and Gokul Refoils as its listed peers that are currently trading around 230 and 3 (as on 25.09.18). Oasis Tradelink is strictly not comparable as it is in manufacturing as well as marketing of edible oils.
MERCHANT BANKER’S TRACK RECORD:
On merchant banker’s front, this is 5th mandate from its stable in last three years. Out of last 4 listings 1 opened at par and the rest with a premium ranging from 2% to 11.11% on the day of listings.
Considering exorbitant pricing, there is no harm in giving this issue a miss.
Review By Dilip Davda on September 25, 2018
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 Sun Retail Limited offers an early investment opportunity in Sun Retail Limited. A stock market investor can buy Sun Retail IPO shares by applying in IPO before Sun Retail Limited shares get listed at the stock exchanges. An investor could invest in Sun Retail IPO for short term listing gain or a long term.
Read the Sun Retail IPO recommendations by the leading analyst and leading stock brokers.
Sun Retail IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Sun Retail IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.
Our recommendation for Sun Retail IPO is to avoid.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Sun Retail IPO.
The Sun Retail IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit Sun Retail IPO allotment status to check.
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