Ajooni Bio NSE SME IPO review (May apply)

Ajooni Biotech Ltd. (ABL) is engaged in manufacturing, producing, processing and supplying of Cattle feed, Nutrients related to cattle feed and manufacturing & production of Animal health care supplements. It is registered with Department of Industries, Govt. of Punjab as Small Scale Industry (SSI) and also registered with Department of Dairy Development, Govt of Punjab. ABL has entered into an Agreement with Patanjali Gramudyog Nyas, Haridwar (PATANJALI) (a unit of Yog Guru Baba Ramdev) for manufacturing of Cattle feed and Distribution of Cattle feed and feed supplements in their brand of Patanjali with 100% buy back arrangement for supplies in the states of Punjab, Himachal Pradesh, some
parts of Jammu & Kashmir, Haryana and Rajasthan. Company is a paramount manufacturer and supplier of superior quality of PATANJALI SAMVRIDDHI, PATANJALI GARBHANJALI, PATANJALI BATISA-PRO etc. The products offered are processed using quality ingredients sourced from the trustworthy vendors of the market. ABL’s manufactured veterinary products find use in the treatment and cure of many diseases in animals.

To part finance its working capital and general corpus fund needs, ABL is coming out with a maiden IPO of 2196000 equity shares of Rs. 10 each at a fixed price of Rs. 30 per share to mobilize Rs. 6.59 crore. Issue opens for subscription on 20.12.17 and will close on 22.12.17. Minimum application is to be made for 4000 shares and in multiples thereon, thereafter. Post allotment shares will be listed on NSE SME Emerge. Issue is solely lead managed by Navigant Corporate Advisors Ltd. and Cameo Corporate Services Ltd. is the registrar to the issue. Issue constitutes 37.51% of the post issue paid up capital of the company. The average cost of acquisition of the shares by the promoters ranging from Rs. 12.34 to Rs. 12.36 per share. After issuing equity shares at par on incorporation, it raised further equity in the price range of Rs. 15 to Rs. 30 per share between March 2014 and August 2017. It has also issued bonus shares in the ratio of 7 shares for every 4 shares held in August 2017. Post issue, its current paid up equity capital of Rs. 3.66 crore will stand enhanced to Rs. 5.86 crore.

On performance front, ABL has posted turnover/net profits of Rs. 7.22 cr. / Rs. 0.07 cr. (FY15), Rs. 13.23 cr. / Rs. 0.10 cr. (FY16) and Rs. 28.58 cr. / Rs. 0.28 cr. (FY16). Thus its top and bottom line has shown growing pattern. It has posted an average EPS of Rs. 2.35 and average RoNW of 23.48% on an equity base of Rs. 0.33 crore. For first five months ended on 31.08.17 it has earned net profit of Rs. 0.16 crore on a turnover of Rs. 13.94 crore. Issue is priced at a P/BV of 2.04 on the basis of its NAV as on 31.08.17 and at a P/BV of 1.71 on the basis of post issue NAV. If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 45 plus against its peers (as mentioned in offer documents) like Avanti Feeds and Hatsun Agro trading at a P/E of around 35 and 87 respectively (as on 14.12.17). However, both these peers are not strictly comparable as they have varied activities. In fact Godrej Agrovet may be a nearest peer with similar activities having major share in their revenues. It is trading at a P/E of 62 plus. Issue appears fully priced and company is dependent on Patanjali for its major revenues.

On merchant banker’s front, this is the 9th mandate from its stable in past three years. Out of 8 listing so far, 3 opened at a discount, one at par and the rest with a premium ranging from 5 to 20% on the offer price on the day of listing.

Conclusion: Being fully priced issue, cash surplus risk savvy investors may consider investment for long term. (Other).