Yasho Industries BSE SME IPO review (May apply)

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Review By Dilip Davda on March 18, 2018

Yasho Industries Ltd. (YIL) is engaged in the manufacturing of varied re-engineered chemicals like Aroma Range, Food Antioxidant Range, Lune & Rubber Range and other Specialty Range. It has two manufacturing units at Vapi in Gujarat.  Company has pre-registered certain products under REACH (Registration, Evaluation, Authorization and Restriction of Chemicals) Regulation, wherein the manufacturers and importers of substances have a general obligation to submit a registration to the European Chemicals Agency for each substance manufactured or imported in quantities of 1 tonne or more per year per company. YIL exports some of its products to European countries and hence has pre-registered certain products under REACH Regulation. It has received various certifications confirming its products to be in line with National and International Standards i.e. HALAL Certifications, STAR KOSHER Certifications, NSF Certifications, FAMIQS Certification, FSSC Certification.

To part finance its expansion and up-gradation of existing facilities,  YIL is coming out with a maiden IPO of 2899200 equity shares of Rs. 10 each comprising fresh equity issue of 899200 shares and 2000000 shares by way of offer for sale (OFS) at a fixed price of Rs. 100 per share to mobilize Rs.28.99 crore. Issue opens for subscription on 19.03.18 and will close on 21.03.18. Minimum application is to be made for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue is solely lead managed by Aryaman Financial Services Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Issue constitutes 26.60% of the post issue paid up capital of the company. Average cost of acquisition of the shares by the promoters is Rs. 10 per share. Its entire equity is issued at par so far. Post issue, its current paid up capital of Rs. 10 cr. will stand enhanced to Rs. 10.90 cr.

On performance front, YIL has posted turnover/net profits of Rs. 157.02 cr. / Rs. –(1.47) cr. (FY14), Rs. 171.35 cr. / Rs. 0.06 cr. (FY15), Rs. 180.08 cr. / Rs. 1.53 cr. (FY16) and Rs. 198.40 cr. / Rs. 3.67 cr. (FY17). For the first half of current fiscal, it has earned net profit of Rs. 1.95 cr. on a turnover of Rs.109.59 cr. For last three fiscals, it has posted an average EPS of Rs. 2.58 and an average RoNW of 14.47%. Issue is priced at a P/BV of 5.21 on the basis of its NAV of Rs. 19.20 as on 30.09.17 and at a P/BV of 3.86 on the basis of its post issue NAV of Rs. 25.91. If we annualize latest earnings and attribute it on fully diluted post issue equity then asking price is at a P/E of around 28 against industry average of 31. As per offer documents, listed peers are trading at a P/E of Nocil (23), Himadri Chem. (32), Amines and Plasti (23), Camphor & Allide (22), S H Kelkar (58) and Transpek Ind. (28) (as on 16.03.18). Thus issue appears fully priced.

On merchant banker’s front, this is 30th mandate from its stable in the past three years (includes 1 main board IPO and the rest SME). Out of last 10 listings, 4 opened at discount, 1 at par, 4 with the premium ranging from 1% to 20%. The only main board listing (Apollo Micro) opened at a premium of around 73.8% on the day of listing.

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