Review By on September 16, 2017
AKM Lace & Embrotex Ltd. (AKM) is engaged in the business of trading of textile products primarily fabrics as well as supply of customized Lace and embroidered work items which we manufacture/process through established job work arrangements. AKM's sale model is divided into two parts, i.e. sale of traded goods, which comprises of cotton fabrics, grey cloth, etc and sale of manufactured/processed goods, which comprises of knitted fabrics primarily lace based. For the year ended March 31, 2017 itsr traded and manufactured goods constituted 73.08% and 26.92% respectively of the total revenue from operations. Company's products are mostly used in the manufacture of apparels such as sarees, shirtings, suitings, and upholstery such as curtains amongst others.
To part finance its working capital and general corpus funds, AKM is coming out with a maiden IPO of 1902000 equity share of Rs. 10 each at a fixed price of Rs. 25 per share to mobilize Rs. 4.76 crore. Issue opens for subscription on 20.09.17 and will close on 22.09.17. Minimum application is to be made for 6000 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 Skyline Financial Services Pvt. Ltd. is the registrar to the issue. Having initial equity at par, company raised further equity in the price range of Rs. 25 to Rs. 500 per share and has also issued bonus shares in the ratio of 10 for 1 in September 2016 out of premium reserves. Post issue its current paid up equity capital of Rs. 1.11 crore will stand enhanced to Rs. 3.01 crore. Issue constitutes 63.14% of fully diluted post issue paid up equity capital of the company.
On performance front, for last four fiscal AKM has reported turnover/net profits of Rs. 0.31 cr. / Rs. 0.001 cr. (FY14), Rs. 0.86 cr. / Rs. 0.003 cr. (FY15), Rs. 1.02 cr. / Rs. 0.006 cr. (FY16) and Rs. 11.31 cr. / Rs. 0.14 cr. (FY17). Sudden jump in top and bottom line is surprising. For last three fiscals, it has posted an average EPS of Rs. 0.70 and average RoNW 2.35%. Issue is priced at a P/BV of 0.90. Thanks to higher NAV due to premium reserves. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of 53 thus issue is priced very aggressively.
On merchant banker's front, this is the 17th mandate from its stable in past three years. Out of last 10 listings, 2 IPOs opened at discount, 1 at par, 5 with meager premium and the rest with 8.5 to 20% premium to offer price on the day of listing.
Conclusion: Considering aggressive pricing, there is no harm in giving this issue a miss.
Review By on September 16, 2017
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 AKM Lace & Embrotex Ltd. offers an early investment opportunity in AKM Lace & Embrotex Ltd.. A stock market investor can buy AKM Lace IPO shares by applying in IPO before AKM Lace & Embrotex Ltd. shares get listed at the stock exchanges. An investor could invest in AKM Lace IPO for short term listing gain or a long term.
Read the AKM Lace IPO recommendations by the leading analyst and leading stock brokers.
AKM Lace IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the AKM Lace IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts mentioned in the above answer to "How is AKM Lace IPO?"
Our recommendation for AKM Lace IPO is to avoid.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the AKM Lace IPO.
The AKM Lace IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit AKM Lace IPO allotment status to check.
