Dynamic Cables BSE SME IPO review (Apply)

Dynamic Cables Ltd. (DCL) is engaged in manufacturing of Cables and Conductors which widely include manufacturing of Low Voltage and High Voltage Power Cables, Aerial Bunched Cables, All Aluminium Conductor (A.A.C.), All Aluminium Alloy Conductor (A.A.A.C.), Aluminium conductor steel reinforced (A.C.S.R.) Conductors and Service Drop Cables used for transmission and distribution of Electricity. Its manufacturing facilities are distributed in three units located in Jaipur, Rajasthan. DCL’s products are type tested & approved by various NABL Accredited laboratories like: CPRI, ERDA & TAG Corporation. Being “Government Recognized Export House” it exports products to countries like Kenya, Tanzania, TOGO, Nigeria, Benin, Uganda, Rwanda, NEPAL, Mauritius, Afghanistan, Jordan, Dubai etc

To part finance its working capital and general corpus fund needs, DCL is coming out with a maiden IPO of 5844000 equity shares of Rs. 10 each at a fixed price of Rs. 40 per share to mobilize Rs.23.38 crore. Issue opens for subscription on 04.12.17 and will close on 06.12.17. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue is solely lead managed by Hem Securities Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Issue constitutes 26.55% of the post issue paid up capital of the company. Since incorporation till February 2014 it issued equity at par. In February 2017 it issued fresh equity at a price of Rs. 81 per share and has also issued bonus shares in the ratio of 1 share for every 2 shares held. Post issue its current paid up equity capital of Rs. 16.17 crore will stand enhanced to Rs. 22.01 crore. The average cost of acquisition of shares by the promoters ranges from Rs. 6.67 to Rs. 14.02 per share.

On performance front, DCL has posted turnover/net profits of Rs. 199.17 cr. / Rs. 1.57 cr. (FY14), Rs. 262.12 cr. / Rs. 2.54 cr. (FY15), Rs. 269.80 cr. / Rs. 6.80 cr. (FY16) and Rs.302.15 cr. / Rs. 7.92 cr. (FY17). For Q1 of current fiscal it has earned net profit of Rs. 2.05 cr. on a turnover of Rs. 88.85 cr. Issue is priced at a P/BV of 1 based on its NAV as on 30.06.17 and at 1.36 on post issue NAV. For last three fiscals it has reported an average EPS of Rs. 4.35 and average RoNW of 20.06%. If we annualize the latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 11 against industry composite of 29 plus. Thus issue appears reasonably priced.

On merchant banker’s front, this is the 43rd mandate from its stable so far. Out of last 10 IPOs, 1 opened at discount and the rest opened with a premium ranging from 3 to 20% on the offer price on listing day.

Conclusion: Investment may be considered for medium to long term (Subscribe).