Affordable Robotic BSE SME IPO review (May apply)

Affordable Robotic & Automation Ltd. (ARAL) is in the business of providing turnkey automation solution to automotive, semi-automotive and manufacturing industries. ARAL programs and automates the functions of machines used in manufacturing process of automobile industry. Its assembly unit is equipped with requisite software, technology, machinery, spares store and other basic amenities  resulting in fully integrated unit. The company is also in the business of assembling and installing automatic multilevel car parking system having executed few orders from Mumbai and Pune. It recently set up a new line of business called Secondary Packaging to cater FMCG industries for automation in container packaging of final packed products.  

To part finance purchase of new plant and machinery, repayment of certain long term borrowings and working capital fund needs, ARAL is coming ou with a maiden IPO of 2681600 equity shares of Rs. 10 each via book building route with a price band of Rs. 83-85 to mobilize Rs. 22.26 cr. to Rs. 22.79 crore (based on lower and upper price bands). Issue opens for subscription on 24.05.18 and will close on 28.05.18. Minimum application is to be made for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue is solely lead managed by Pantomath Capital Advisor Pvt. Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue. Issue constitutes 26.33% of post issue paid up capital of the company. Having issued initial equity at par, it raised further equity at a price of Rs. 75 per share in February 18 and April 18. It has also issued bonus shares in the ratio of 4 for 1 in February 2016 and 4 for 1 in October 2017. Average cost of acquisition of shares by the promoters is Rs. 0.40 per share. Post issue, its current paid up equity capital of Rs. 7.50 cr. will stand enhanced to Rs. 10.18 cr.

On performance front, for last four fiscals, on standalone basis ARAL has posted turnover/net profits of Rs. 24.23 cr. / Rs. 0.81cr. (FY14), Rs. 25.95 cr. / Rs. 0.14 cr. (FY15), Rs. 47.09 cr. / Rs. 1.22 cr. (FY16) and Rs. 40.39 cr. / Rs. 3.96 cr. (FY17). For first nine months ended on 31.12.17 of FY18 it has earned net profit of Rs. 4.07 cr. on a turnover of Rs. 46.69 cr. After inconsistency in bottom lines for FY14 to FY16 it has marked surprised robust growth for FY17 and first three quarters of FY18. Sustainability of the same raises concern as for FY16 despite record high turnover till then it marked lower net compared to FY17. First nine months overshoot entire FY17 earnings. Thus miss-match of top and bottom lines are evident from the performance so far. As per offer documents on consolidated basis it has recorded turnover of Rs. 41.56 cr. with a net profit of Rs. 3.72 crore for FY17 and for nine months of FY18 it has earned net profit of Rs. 3.76 cr. on a turnover of Rs. 46.75 cr. Thus on consolidated basis it has posted lower net for FY18 3Qs compared to on standalone basis. On standalone basis for last three fiscals it has posted an average EPS of Rs. 3.85 and an average RoNW of 43.89% (with super profits for FY17). Issue is priced at a P/BV of 4.85 on the basis of NAV of Rs. 17.54 (standalone) and at a P/BV of 5.10 on the basis of its NAV of Rs. 16.67 (as on 31.12.17). If we annualize latest earnings (consolidated basis) and attribute it on fully diluted equity post issue, then asking price is at a P/E of around  17 plus. It has no listed peers to compare with. As on 31.12.17 its debt equity ratio is 0.79.

On merchant banker’s front, this is 63rd mandate from its stable in last three fiscals. Out of last 10 listings all opened with a premium on offer price ranging from 1.59% to 40% on the day of listing.