Suyog Gurbaxani BSE SME IPO review (Avoid)

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Review By Dilip Davda on October 28, 2021

•    SGFR is in infrastructure developments and constructions.
•    Currently it has just one Funicular Ropeway system installed at Nashik.
•    For the last 39 months it has posted accumulated losses.
•    Its NAV as of June 30, 2021, is Rs. 3.31 against its FV of Rs. 10.
•    Just stay away from such a loss-making company.

ABOUT COMPANY:
Suyog Gurbaxani Funicular Rope Ways Ltd. (SGFR) is an infrastructure development and constructions company engaged in building & operating the Funicular Ropeways Systems. The Company is currently involved in an Infrastructural Development project through a Build, Operate and Transfer mode ("BOT") wherein, it has completed the construction of a Funicular Ropeway System project (also known as Incline Ropeways) at Saptashrungi Gad Temple situated at Vani, Nashik, Maharashtra. Saptashrungi Gad Temple is a popular destination for devotees where people come from all over India for taking the blessings of Goddess and this temple experiences a large number of visitors throughout the years and also experiences some of the peak seasons at the time of Navratri festivals which happens two times in a year. 

SGFR's project is spread over in an area of 10 acres, which houses the funicular ropeway system, a shopping mall, a parking facility and a hotel facility. Its Saptashrungi Project primarily has a Funicular Ropeway System consisting of 2 Air Conditioner funicular vehicles/coaches which can carry 60 passengers/ devotees at a time. The Shopping complex, forming a part of the project, provides the facility of more than 50 shops providing various buying avenues to the visitors including food shops. The parking facility built in the vicinity of the funicular ropeway has a capacity of more than 150 vehicles including four-wheelers and two-wheelers. The company also has constructed a hotel that houses 28 guest rooms & dormitories, a multi-cuisine restaurant and a coffee shop. 

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for repayment of loans (Rs. 5.00 cr.), general corporate purpose (Rs. 1.37 cr.), SGFR is coming out with a maiden IPO of 6555000 equity share of Rs. 10 each at a fixed price of Rs. 45 per share to mobilize Rs. 29.50 cr. The issue comprises 1500000 fresh equity shares worth Rs.6.75 cr. and an Offer for Sale (OFS) of 5055000 equity shares worth Rs. 22.75 cr. The issue opens for subscription on November 01, 2021, and will close on November 08, 2021. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME.  The issue constitutes 26.37% of the post issue paid-up capital of the company. SGFR will be spending Rs. 0.51 cr. (including Rs. 0.38 cr. for fresh equity issue) for this IPO process. 

The issue is solely lead managed by Aryaman Financial Services Ltd. while KFin Technologies Pvt. Ltd. is the registrar to the issue. Aryaman Capital Markets Ltd. is the market maker for this company. 

SGFR has issued/converted entire equity shares at par till the date of filing this offer documents. The average cost of acquisition of shares by the promoters is Rs. 10 per share. 

Post issue, SGFR's current paid-up equity capital of Rs. 23.36 cr. will stand enhanced to Rs. 24.86 cr. (24862222 shares). Based on the IPO pricing, the company is looking for a market cap of Rs. 111.88 cr. 

FINANCIAL PERFORMANCE: 
On the financial performance front, for the last three fiscals, SGFR has posted turnover/net profits (Loss) of Rs. 7.91 cr. / Rs. - (3.48) cr. (FY19), Rs. 13.19 cr. / Rs. - (1.88) cr. (FY20) and Rs. 4.48 cr. / Rs. - (7.93) cr. (FY21). For the first three months of FY22 ended on June 30, 2021, it has posted a loss of Rs. - (2.32) cr. on a turnover of Rs. 0.001 cr. Thus while it has posted erratic top lines, it continued to incur losses which have wides for the last 15 months working. 

For the last three fiscals, SGFR has posted an average negative EPS of Rs. - (2.62) and an average negative RoNW of - (64.45%). The issue is priced at a P/BV of 13.6 based on its NAV as of Rs. 3.31 as of June 30, 2021, and at a P/BV of 6.66 based on its post-issue NAV of Rs. 6.76.  

Since the company had negative earnings for the last 39 months working, its P/E cannot be ascertained. But considering its consistent losses, the issue is priced exorbitantly. 

DIVIDEND POLICY:
The company has not paid any dividends since incorporation. 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 documents, SGFR has no listed peers to compare with. 

MERCHANT BANKER'S TRACK RECORD:
This is the 16th mandate from Aryaman Financial in the last three fiscals including the ongoing one. Out of the last 10 listings, 1 issue opened at a discount, the rest with a premium ranging from 0.04% to 2.16%. Thus it has an average track record.

Suyog Gurbaxani Funicular Ropeways IPO FAQs