Bhavik Enterprises BSE SME IPO review (Not Rated)

•    The company is engaged in trading of PE and PP that finds wide uses and application across many industries like packaging, infrastructure, agriculture etc.
•    It is operating in a highly competitive and fragmented segment.
•    Surprisingly, it posted growth in its top lines, but marked slide in bottom lines for the reported periods.
•    Based on its recent financial data, the issue appears aggressively priced.
•    There is no harm in skipping this pricey offer that can be termed as “High Risk/Low Return”.

ABOUT COMPANY:
Bhavik Enterprises Ltd. (BEL) is engaged in trading of polymers primarily in Polyethylene (PE) and Polypropylene (PP) which has a wider usage and application in various industries such as packaging, infrastructure, agriculture and many more. It provides a broad range of products to customers which increases the scope of customers and its ability to cater to a diversified clientele base. Its comprehensive product portfolio under Polyethylene (PE) includes LLDPE, LDPE, HDPE and MLLDPE. Under Polypropylene (PP), its product portfolio consists of Homo polymer, Impact Co-polymer and Random Co-polymer. Company’s business model emphasizes "Stock & Sale" catering to small, medium and large customers as per their requirement. 

It is presently engaged in the domestic B2B trading of polymer, wherein it imports the material and stores the same at warehouses and depots and sells them thereafter to manufacturer of plastic product. These end use customers include manufacturers of pressure pipes, non-pressure pipes, drip pipe, shrink film, lamination film, mulch film, greenhouse films, CPP films, liners, EPE foam, woven sack bags, spun bond nonwoven fabric, paint pails, crates, houseware products, suitcases, thin wall containers. Polyethylene (PE) and Polypropylene (PP) are two of the most consumed thermoplastic components in the world. PE is the most commonly produced and consumed polymer compound globally. If finds application in a wide range of products, ranging from every day usage products to niche products. Some of the uses of PE include usage in manufacture of PET bottles, bags & food containers, pipes & pipe fittings. Flexible packaging films, and medical implants, to name a few. 

The popularity of polypropylene stems from its unique blend of properties including flexibility, moisture resistance, superior impact strength, insulation properties, and the smallest impact on environment amongst all popular thermoplastics. These unique properties & attributes has led to its usage as mouldings, fibers, tape, foam, and film. In these separate forms PP is used across a wide range of industries including automotive, plastic packaging, technical textiles, and plastic parts used in machinery/equipment’s. This widespread usage pattern of PP in its various forms across multiple industries has given the commodity a strong and varied demand base. (Source: D&B Reports) The Company is an authorized distributor of Borouge Pte Ltd to market and sell “Borouge” products in India. Borouge Pte Ltd is a Singapore based multinational company which is engaged in manufacturing and distribution of Polyethylene (PE) and Polypropylene (PP) and related compounds. The company also share business relation with another petrochemical multinational company i.e., Basell International Trading FZE, a Dubai based Company from whom it is regularly importing the “LyondellBasell” products and sell it in India. Basell International Trading FZE is the producers of versatile plastic resins, such as polypropylene, polypropylene compounds and polyethylene. It imports the products from these overseas suppliers and sell it in domestic market as per prevailing market price.

Currently BEL supplying products in various states of India includes Gujarat, Maharashtra, Rajasthan, Diu-daman, Uttar Pradesh, Telangana, Chhattisgarh, Madhya Pradesh, Haryana, Delhi. A majority of its sales are derived from the states of Maharashtra, Gujarat, Rajasthan, and the Union Territory of Diu and Daman. The company gradually intends to expand business operations to other states of the country as well as into global markets also. It focuses on maintaining a seamless supply chain by leveraging expertise in logistics, procurement, pricing and ensuring timely deliver to customers. For the financial year ended March 31, 2025, 2024 and 2023, it has supplied 54,247.63 metric tons, 50,300.90 metric tons and 44,524.10 metric tons respectively of polymers, underscoring operational scale and growth trajectory. As of March 31, 2025, it had 18 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden IPO of 5500000 equity shares at a fixed price of Rs. 140 per share of Rs. 10 each, to mobilize Rs. 77.00 cr. The IPO opens for subscription on September 25, 2025, and will close on September 30, 2025. The issue comprises of 4500000 fresh equity shares worth Rs. 63 cr. and an Offer for Sale (OFS) of 1000000 equity shares worth Rs. 14 cr. The minimum application to be made is for 2000 shares and in multiple of 1000 shares thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 27.02% of post-IPO paid-up equity capital of the company. The company is spending Rs. 8.40 cr. for this IPO process, and from the net proceeds of the issue, the company will utilize Rs. 47.50 cr. for working capital, and Rs. 7.10 cr. for general corporate purposes. Higher spending for IPO process indicates fully structured mode of the issue.

The IPO is solely lead managed by Smart Horizon Capital Advisors Pvt. Ltd., while Bigshare Services Pvt. Ltd. is the registrar to the issue. Shreni group’s Shreni Shares Ltd. is the market maker, as well as a syndicate member. 

The company has issued/converted entire initial equity shares at par, and has also issued bonus shares in the ratio of 2 for 1 in January 2025. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 2.86, Rs. 3.33, and Rs. 30.54 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 15.86 cr. will stand enhanced to Rs. 20.36 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 285.01 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit, of Rs. 491.09 cr. / Rs. 15.56 cr. (FY23), Rs. 500.35 cr. / Rs. 7.89 cr. (FY24), Rs. 531.46 cr. / Rs. 5.68 cr. (FY25). The company has presented odd financial data where its top line continued to grow, but bottom line kept sliding.

For the last three fiscals, the company has reported an average EPS of Rs. 5.09, and an average RoNW of 8.82%. The issue is priced at a P/BV of 2.27 based on its NAV of Rs. 61.81 as of March 31, 2025, and at a P/BV of 1.87 based on its post-IPO NAV of Rs. 74.97 per share.

If we attribute its FY25 super earnings on post-IPO expanded equity base, then the asking price is at a P/E of 50.18, and based on its FY24 earnings, the P/E stands at 36.08. Thus, the issue appears aggressively priced.

The company has posted PAT margins of 3.19% (FY23), 1.60% (FY24), 1.08% (FY25), and RoCE Margins of 24.70%, 11.55%, 7.84%, respectively for the referred periods. 

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy, based on its financial performances and future prospects.

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

MERCHANT BANKER’S TRACK RECORDS:
This is the 13th mandate from Smart Horizon in the last two fiscals (including the ongoing one). Out of last 10 listings, 1 opened at discount, 1 at par, and the rest opened at premium ranging from 0.81% to 90.00% on the date of listing.