Billwin Ind BSE SME IPO review (Avoid)

•    BIL is engaged in manufacturing and trading of protective gears.
•    Financial performance of the company is not in line with asking price.
•    Issue is exorbitantly priced at a P/E of 264+.
•    Lead Manager has average track records.
•    Investors may avoid applying in this highly-priced IPO.

ABOUT COMPANY:
Billwin Industries Ltd. (BIL) is engaged in the business of manufacturing of protective gears; these gears are basically rain wears, life jackets and inflatable boats which are used in seas and other water bodies for the safety. The raw material used to manufacture these protective gears is called Coated Fabric. The company is also involved in trading of the protective gears that it manufactures. BIL's product range includes Rainwear Coat, Rain Jacket, Pulsar Jacket, Winter Jacket, River Raft Boat, Inflatable Boats Dinghys, Sleeping Bags, School Bags, Life jackets, Rucksack, facial's mask etc.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for working capital (Rs. 1.92 cr.), BIL is coming out with a maiden IPO of 666000 shares of Rs. 10 each at a fixed price of Rs. 37 per share to mobilize Rs. 2.46 cr. The issue opens for subscription on 18.06.20 and will close on 22.06.20. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue constitutes 31.26% of the post issue paid-up capital of the company.

The issue is solely lead managed by Gretex Corporate Services Pvt. Ltd., while Bigshare Services Pvt. Ltd. is the registrar to the issue. Gretex Share Broking Pvt. Ltd. is acting as a market maker for this IPO. BIL is spending Rs. 0.54 cr. for this IPO process.  From the issue expenses point of view, this issue is fully structured with funding arrangements.

Post issue BIL's current paid-up equity capital of Rs. 1.46 cr. will stand enhanced to Rs. 2.13 cr. It mulls a market cap of Rs. 7.88 cr. post this issue.

Having issued initial equity at par, BIL has also converted equity shares in the price range of Rs. 38 in March 2020. It has also issued bonus shares in the ratio of 5 shares for every 1 share held in March 2019 and 1 share for every 1 share held in March 2020. The average cost of acquisition of shares by the promoters is Rs. 0.83 and Rs. 18.24 per share.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, BIL has reported turnover/net profits of Rs. 0.46 cr. / Rs. 0.01 cr. (FY17), Rs. 1.85 cr. / Rs. 0.11 cr. (FY18) and Rs. 0.61 cr. / Rs. 0.11 cr. (FY19). For the period ended on 05.03.2020 of FY20, it has earned a net profit of Rs. 0.03 cr. on a turnover of Rs. 0.38 cr. Thus the company has shown inconsistency in turnover/profits.

For the last three fiscals, BIL has posted an average EPS of Rs. 1.17 and an average RoNW of 67.70%. RONW as at 05.03.2020 is 1.27% and will further decline if we consider it on a post-issue equity basis.

The issue is priced at a P/BV of 0.99 based on its NAV of Rs. 37.44 as on 05.03.2020 and at a P/BV of 1.51 on the basis of post-issue NAV of Rs. 24.43.

 If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of 264+ making it exorbitantly priced offer. BIL has not declared any dividend in the past five financial years.

COMPARISION WITH LISTED PEERS:
As per offer documents, BIL has shown Mallcom (India) as its listed peers. It is currently trading at a P/E of around 9.44 (as on 12.06.2020). However, they are not strictly comparable on an apple to apple basis.

MERCHANT BANKER'S TRACK RECORD:
On merchant banker's front, this is the 20th mandate from its stable since FY 2016-17. Out of the last 10 mandates listed one opened at par and the rest opened with premiums ranging from 1.32% to 8% on the day of listings. Thus it has an average track record.