Review By on September 3, 2018
• AKG is in the trading business for import and export of commodities.
• Counterpart is a group company having similar interest.
• Sudden jump in bottom line for FY18 is a bit surprising.
• Issue is priced at a P/E of 20 plus.
• LM has average track record.
ABOUT COMPANY:
AKG Exim Ltd. (AKG) is a diversified merchant trading company in vast range of products & commodities with quality management system confirming to ISO 9001:2008. Company is a merchandiser, distributor of variety of products including Non Basmati Rice, Metal Scrap, Aluminium scrap, Iron Scrap, Spices and Dry Fruits, etc. With a steady expansion in the market, company is consistently aiming to achieve its mission of providing world class customer services. Metal Scrap etc. is being imported from Singapore and sold in Indian Domestic markets; and Non Basmati Rice is being purchased in the Indian domestic Market and Exported in Signapore. 100% of Non Basmati Rice is being exported by the Company.
ISSUE DETAILS/CAPITAL HISTORY:
To part finance its working capital and general corpus fund needs, AKG is coming out with a maiden IPO of 1780000 equity shares of Rs. 10 each at a fixed price of Rs. 31 per share. Company mulls mobilizing Rs. 5.52 cr. with this issue. Issue opens for subscription on 10.09.18 and will close on 14.09.18. 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 constitutes 36.89% of the post issue paid up capital of the company. Issue is solely lead managed by Navigant Corporate Advisors Ltd. and Mas Services Ltd. is the registrar to the issue. Having issued initial equity and a token rights issue in March 2017 at par, it raised further equity at a price of Rs. 100 per share between March 2011 and January 2013. It has also issued bonus shares in the ratio of 1 for 1 in January 2018. Average cost of acquisition of shares by the promoters is Rs. 5.13 per share. Post issue, AKG’s current paid up equity capital of Rs. 4.84 cr. will stand enhanced to Rs. 6.62 cr.
FINANCIAL PERFORMANCE:
On performance front, for last four fiscals, AKG has posted turnover/net profits of Rs. 74.82 cr. / Rs. 0.41 cr. (FY15), Rs. 98.59 cr. / Rs. 0.41 cr. (FY16), Rs. 105.55 cr. / Rs. 0.49 cr. (FY17) and Rs. 112.35 cr. / Rs. 1.02 cr. (FY18). Sudden jump in bottom line for FY18 is a bit surprising. For last three fiscals, company has posted an average EPS of Rs. 2.70 and an average RoNW of 6.34%. Issue is priced at a P/BV of 0.76 on the basis of its NAV of Rs. 40.92 as on 31.03.18 and at a P/BV of 1.19 on the basis of post issue NAV of Rs. 26.04. If we consider FY18 earnings and attribute it on fully diluted post issue equity, then asking price is at a P/E of around 20 plus, against industry average of 164 (??).
COMPARISION WITH LISTED PEERS:
As per offer documents, it has shown Agro Tech Foods and AuSom Enterprise as its listed peers that are currently trading at a P/Es of around 50 and 5 (as on 03.09.18). However, they are not strictly comparable. Recent poor listing of Sarveshwar Foods SME IPO dented general sentiment for agro base companies.
MERCHANT BANKER’S TRACK RECORD:
On merchant banker’s front, this is the 15th mandate from its stable in last three years. Out of last 10 listings, 3 opened at discount, 1 at par and the rest with a premium ranging from 5% to 20% on the day of listings.
Issue is fully priced. Sudden jump in FY18 earnings is a bit surprising. LM has average track record. AKG’s export/ import business is with a group company having similar business that raises concern. Rupee/Dollar parity may impact it’s working. Cash surplus investors may consider investment at their own risk.
Review By on September 3, 2018
Dilip Davda is a veteran financial journalist associated with the Indian stock market since 1978. He has been contributing to print and electronic media on capital markets, insurance, and finance since 1985.
He is widely recognized for reviewing public issues and non-convertible debentures (NCDs) in the primary market. Drawing on over three decades of market experience and close interaction with merchant bankers, his reviews focus on detailed fundamental and financial analysis of companies, with a special emphasis on SME public issues.
Dilip Davda
SEBI Registered Research Analyst – Mumbai
Registration No.: INH000003127 (Perpetual)
Email: dilip_davda@rediffmail.com
Disclaimer: The information provided herein is solely for educational and informational purposes and does not constitute an offer, solicitation, or recommendation to buy or sell any securities. Readers are advised to consult a qualified financial advisor before making any investment decisions. Investments in the securities market are subject to market risks. The author does not intend to invest in the securities discussed.
The initial public offer (IPO) of AKG Exim Ltd. offers an early investment opportunity in AKG Exim Ltd.. A stock market investor can buy AKG Exim IPO shares by applying in IPO before AKG Exim Ltd. shares get listed at the stock exchanges. An investor could invest in AKG Exim IPO for short term listing gain or a long term.
Read the AKG Exim IPO recommendations by the leading analyst and leading stock brokers.
AKG Exim IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the AKG Exim IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts mentioned in the above answer to "How is AKG Exim IPO?"
Our recommendation for AKG Exim IPO is to subscribe for long term.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the AKG Exim IPO.
The AKG Exim IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit AKG Exim IPO allotment status to check.
