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Review By Dilip Davda on September 26, 2023
• VTL is in the business of trading textile fabrics and readymade garments.
• It is operating in a highly competitive and fragmented segment.
• The company posted a roller-coaster rise in its financial performance.
• Based on FY23 earnings, the issue is exorbitantly priced.
• Just stay away from such pricey and dicey issues.
ABOUT COMPANY:
Vivaa Tradecom Ltd. (VTL) was initially engaged in the trading of Textile Fabrics and Readymade Garments. In year2013, it acquired the ongoing manufacturing business of Readymade Garments under the Slump Sale Agreement from M/s. Parikh Impex Private Limited along with goodwill, brand name and know-how, and the entire assets and liabilities along with their trained laborer.
The Company is engaged in the manufacturing as well as trading of clothes and Garments. The company was selling readymade garments to various reputed clients on a Pan India basis. Lifestyle International Pvt. Ltd., Aditya Birla Fashion and Retail Ltd., Lajja Polyfab Pvt. Ltd., Nandan Denim Limited, Bajaj Impex, Reliance Retailers Limited, etc. were some of its reputed clients. Denim jeans garments and denim clothes were one of its prime traded segments. The company directly purchases readymade garments and cotton and Jeans garments from the market and sells them to customers. From April 2022 its major business is with the Ahmedabad-based buyer and seller.
Its major trading activities are now a day is concentrated within Gujarat. On March 31, 2022, the company sold the Factory under the Business undertaking as a going concern basis, by way of slump sale to Globe Textiles (India) Ltd. at a consideration of Rs.26.43 cr. The Factory was sold under slump sale. Thus it has turned into an Assets Light Model while selling the manufacturing units. As of August 31, 2023, it had just 4 employees on its payroll.
ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden IPO of 1566000 equity shares of Rs. 10 each at a fixed price of Rs. 51 per share to mobilize Rs. 7.99 cr. The issue opens for subscription on September 27, 2023, and will close on October 04, 2023. The minimum application to be made is for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 39.77% of the post-IPO paid-up capital of the company. VTL is spending Rs. 1.09 cr. for this IPO process and from the net proceeds, it will utilize Rs. 5.18 cr. for working capital, and Rs. 1.72 cr. for general corporate purposes.
Interactive Financial Services Ltd. is the sole lead manager and Bigshare Services Pvt. Ltd. is the registrar of the issue. Asnani Stock Broker Pvt. Ltd. is the market maker for the company.
Having issued initial equity shares at par, the company issued further equity shares in the price range of Rs. 100 - Rs. 3766 per share between February 2020 and November 2022. It has also issued bonus shares in the ratio of 50 for 1 in December 2022. The average cost of acquisition of the shares by the promoters is Rs. 42.48 per share.
Post-IPO, VTL's current paid-up equity capital of Rs. 2.37 cr. will stand enhanced to Rs. 3.94 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 20.08 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit/ - (loss) of Rs. 147.35 cr. / Rs. - (0.07) cr. (FY21), Rs. 247.29 cr. / Rs. 0.44 cr. (FY22), and Rs. 134.03 cr. / Rs. 0.26 cr. (FY23). It has posted a roller-coaster rise for its top and bottom lines for the reported periods.
For the last three fiscals, VTL has reported an average EPS of Rs. 1.12 and an average RoNW of 2.10%. The issue is priced at a P/BV of 1.00 based on its NAV of Rs. 51.09 as of March 31, 2023, and at a P/BV of 1.00 based on its post-IPO NAV of Rs. 51.06 per share. Thanks to the fancy premium collected for the issue of shares that has helped in showing higher NAV as of March 31, 2023.
If we attribute FY23 earnings to the post-IPO fully diluted paid-p equity capital of the company, then the asking price is at a P/E of 78.46. Thus the issue is exorbitantly priced.
DIVIDEND POLICY:
The company has not declared any dividends since incorporation. It will adopt a prudent dividend policy based on its financial performance and future prospects.
COMPARISON WITH LISTED PEERS:
As per the offer documents, the company has shown Thomas Scott and Bang Overseas as their listed peers. They are trading at a P/E of 17.48 and 00 (as of September 25, 2023). However, they are not comparable on an apple-to-apple basis.
MERCHANT BANKER'S TRACK RECORD:
This is the 12th mandate from Interactive Financial in the last three fiscals (including the ongoing one). Out of the last 10 listings, 2 opened at discount, 2 opened at par, and the rest with premiums ranging from 0.79% to 20.74% on the day of listing. It has a poor track record so far.
Review By Dilip Davda on September 26, 2023
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 Vivaa Tradecom Limited offers an early investment opportunity in Vivaa Tradecom Limited. A stock market investor can buy Vivaa Tradecom IPO shares by applying in IPO before Vivaa Tradecom Limited shares get listed at the stock exchanges. An investor could invest in Vivaa Tradecom IPO for short term listing gain or a long term.
Read the Vivaa Tradecom IPO recommendations by the leading analyst and leading stock brokers.
Vivaa Tradecom IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Vivaa Tradecom IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.
Our recommendation for Vivaa Tradecom IPO is to avoid.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Vivaa Tradecom IPO.
The Vivaa Tradecom IPO allotment status will be available on or around October 9, 2023. The allotted shares will be credited in demat account by October 11, 2023. Visit Vivaa Tradecom IPO allotment status to check.
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