Dolfin Rubber BSE SME IPO review (May apply)

•    Company manufactures tyre tubes and markets under 'Dolfin' brand
•    Top line has been growing consistently, but bottom line marked setback for FY16
•    Based on financial parameters, issue appears fully priced.
•    Growing demands for tubeless tyres may pose big challenge for this segment.

ABOUT COMPANY:
Dolfin Rubber Ltd. (DRL) is engaged in manufacturing of Auto and Animal Driven Vehicle (ADV) tubes supporting the tyre industry near Ludhiana (Punjab). Its range of rubber tubes, suitable for tyres of various types of vehicles viz., Mopeds, Scooters, Motorcycles, Cars, Jeeps, Buses, Trucks and Tractors with the use of Butyl rubber. DRL was incorporated on October 12, 1995 and started journey of manufacturing tubes in the year 1997.

In order to reach to the users, company has established distribution network across India. It has  footsteps in every corner of India through wide network of distributors  in 27 states and union territories in India. Company’s growing distribution network facilitates the efficient sale of its products in targeted markets and promotes its brand visibility. The company markets its products under the brand name 'Dolfin'.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its working capital and general corpus fund needs, DRL is coming out with a maiden IPO of 2000000 equity shares of Rs. 10 each with a fixed price of Rs. 26 per share. Company mulls mobilizing Rs. 5.20 cr. with this float. Issue opens for subscription on 27.09.18 and will close on 01.10.18. Minimum application is to be made for 4000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue constitutes 26.59% of the post issue paid up capital of the company.

Issue is solely lead managed by Guiness Corporate Advisors Pvt. Ltd. while Bigshare Services Pvt. Ltd. is the registrar to the issue. Having issued initial equity at par, it raised further equity at a price of Rs. 20 per share. It has also issued bonus shares in the ratio of 3 for 1 in December 2016. Average cost of acquisition of shares by the promoters is Rs. 2.71 and Rs. 2.83 per share. Post issue, DRL’s current paid up equity capital of Rs. 5.52 cr. will stand enhanced to Rs. 7.52 cr.

FINANCIAL PERFORMANCE:
On financial performance front, for last four fiscals, DRL has posted turnover/net profits of Rs. 32.55 cr. / Rs. 0.67 cr. (FY15), Rs. 40.92 cr. / Rs. 0.53 cr. (FY16), Rs. 43.09 cr. / Rs. 0.70 cr. (FY17) and Rs. 54.02 cr. / Rs. 1.34 cr. (FY18). It suffered a setback in bottom lines for FY16. For last three fiscals, it has posted an average EPS of Rs. 1.79 and an average RoNW of 14.29%. Issue is priced at a P/BV of 1.91 based on its NAV of Rs. 13.59 as on 31.03.18 and at a P.BV of 1.54 based on post issue NAV of Rs. 16.89. If we consider FY18 earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 15. Thus issue appears fully priced. Arena of tubeless tyres is rising fast and may pose major concern for this industry.

COMPARE WITH LISTED PEERS:
There are no listed peers as per the data given in offer documents.

MERCHANT BANKER TRACK RECORD:
On merchant banker’s front, this is 28th mandate from its stable in last three fiscals. Out of last 10 listings 1 open at discount and the rest with a premium ranging from 0.14% to 28.72%.