Aaradhya Disposal NSE SME IPO review

•    The company is engaged in manufacturing of paper products catering to wide range of industries.
•    The company posted inconsistency in its top lines for the reported periods.
•    The bottom line marked gains following adding diverse range of high margin biodegrade products.
•    Based on its recent financial data, the issue appears fully priced. 
•    Well-informed investors may park funds for long term.

ABOUT COMPANY:
Aaradhya Disposal Industries Ltd. (ADIL) – it specializes in the manufacturing of paper products that cater to a wide range of industries, both domestically and internationally. With over a decade of expertise, it offers an extensive range of paper-based solutions that are engineered for performance, sustainability, and versatility which mainly includes:

• Paper cup blanks
✓ PE coated ✓ PLA coated and ✓ Barrier coated;

• Food Grade Papers including:
✓ Greaseproof Paper, ✓ Greaseproof 4K Paper, ✓ Greaseproof Slip Easy Paper, ✓ Wet Strength Greaseproof, ✓ OGR (Oil and Grease Resistant) Paper, ✓ Vegetable Parchment Paper and ✓ TDL (Titanium Di-oxide) Poster Paper.

ADIL offers customized solutions tailored to the unique needs of customers, ensuring that they receive products that meet their specific requirements. Whether for retail packaging, foodservice use, or commercial printing, its products are trusted for their quality, performance, and sustainability. As of June 30, 3035, it had 33 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route combo IPO of 3888000 equity shares of Rs. 10 each to mobilize Rs. 45.10 cr. at the upper cap. It has announced a price band of Rs. 110 – Rs. 116 per share. The issue opens for subscription on August 04, 2025, and will close on August 06, 2025. The minimum number of shares to be applied is for 2400 shares and in multiples of 1200 shares, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 27.50% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 20.00 cr. for working capital, Rs. 15.86 cr. for capex purchase of plant and machinery as well as civil work, Rs. 1.60 cr. for prepayment of term loans, and the rest for general corporate purposes. 

The IPO is solely lead managed by Khambatta Securities Ltd., and Bigshare Services Pvt. Ltd., is the registrar to the issue. Prabhat Financial Services Ltd. is a market maker, as well as a syndicate member.

The company has issued entire initial equity shares at par value. It issued further equity capital at a fixed price of Rs. 93 per share in September 2024. It has issued bonus equity shares in the ratio of 1 for 1 in July 2024. The average cost of acquisition of shares by the promoters is Rs. 4.84, Rs. 4.98, and Rs. 5.37 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 10.25 cr. will stand enhanced to Rs. 14.14 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 164.00 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 86.51 cr. / Rs. 2.15 cr. (FY23), Rs. 75.91 cr. / Rs. 3.99 cr. (FY24), Rs. 115.96 cr. / Rs. 10.27 cr. (FY25). 

Setback in top line for FY24 is attributed to highly volatile prices of paper and paper products. Quantum jump in profits for FY25 is due to added high margin biodegrade products with diverse ranges to meet demands from various segments.

For the last three fiscals, the company has reported an average EPS of Rs. 6.76 and an average RoNW of 28.21%. The issue is priced at a P/BV of 3.99 based on its NAV of Rs. 29.07 as of March 31, 2025, but its post-IPO NAV data is missing from offer documents.

If we attribute FY25 super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 15.98. Based on FY24 earnings, the P/E stands at 41.13. Thus, the issue appears fully priced.

For the reported periods, the company has posted PAT margins of 2.55% (FY23), 5.39% (FY24), 9.04%, (FY25), and RoCE margins of 8.24%, 12.57%, 25.15%, respectively for the referred periods. 

DIVIDEND POLICY:
The company has not paid any dividends since incorporation. It will adopt a prudent dividend policy, based on its financial performance and future prospects.

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has no listed peers to compare with.

MERCHANT BANKER’S TRACK RECORD:
This is the 13th mandate from Khambatta Securities in the last three fiscals including the ongoing one.  From the last 12 listings, 1 opened at discount and the rest with premium ranging from 3.33% to 306.88% on the date of listing.