Gajanand Intl. NSE SME IPO review (May apply)

•    The company is in the business of manufacturing and marketing of variety of cotton.
•    It posted growth in its financial performance post the Pandemic.
•    Based on FY24 earnings the issue relatively appears fully priced.
•    Market is witnessing fancy for textile segment counters off late.
•    Well-informed investors may park funds for medium to long term. 

ABOUT COMPANY:
Gajananad International Ltd. (GIL) is an ISO 9001:2015 certified manufacturer. It basically manufactures the types of cotton i.e. Mech1 Cotton, Shankar6 Cotton etc. It has constructed well-established manufacturing units for Ginning, quality inspection, Storage and packing that is equipped with all the necessary hi-tech machines and tools that are required for a modern manufacturing unit. Machinery that is equipped in its infrastructure is operated by company's team. 

The company majorly focuses in delivering quality cotton and maintaining long term association with clients. The level of advancement determines the productivity of machines and labour, which in turn, determines the production and profitability of the Company. GIL plans its business strategy on the advance intimation of the segment it is engaged and thus manages the business with cost control process.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden IPO of 5736000 equity shares of Rs. 10 each at a fixed price of Rs. 36 per share to mobilize Rs. 20.65 cr. The issue opens for subscription on September 09, 2024, and will close on September 11, 2024. The minimum application to be made is for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 30.45% of the post-IPO paid-up capital of the company. The company is spending Rs. 1.65 cr. for this IPO process, and from the net proceeds, it will utilize Rs. 14.99 cr. for working capital, and Rs. 4.01 for general corporate purposes. 

The issue is solely lead managed by Fast Track Finsec Pvt. Ltd., and Skyline Financial Services Pvt. Ltd. is the registrar to the issue. Nikunj Stock Brokers Ltd. is the market maker for the company. 

Having converted initial equity shares at par value, the company issued further equity shares in the price range of Rs. 50 - Rs. 800 between October 2009 and September 2023. It has also issued bonus shares in the ratio of 15 for 1 in October 2023. The average cost of acquisition of shares by the promoters is Rs. 4.50, Rs. 4.91, and Rs. 5.41 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 13.10 cr. will stand enhanced to Rs. 18.84 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 67.81 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 61.76 cr. / Rs. 0.03 cr. (FY22), Rs. 73.42 cr. / Rs. 1.41 cr. (FY23), Rs. 108.75 cr. / Rs. 2.24 cr. (FY24). 

For the last three fiscals, it has reported an average EPS of Rs. 1.46, and an average RoNW of 18.35%. The issue is priced at a P/BV of 2.66 based on its NAV of Rs. 13.52 as of March 31, 2024, and at a P/BV of 1.77 based on its post-IPO NAV of Rs. 20.31 per share. 

If we attribute FY24 earnings to its post-IPO fully diluted paid-up capital, then the asking price is at a P/E of 30.25. The issue relatively appears fully priced. 

For the reported periods, the company has posted PAT margins of 0.05% (FY22), 1.92% (FY23), 2.06% (FY24), and RoCE margins of 13.64%, 31.30%, 29.72% respectively for the referred periods. 

DIVIDEND POLICY:
The company has not declared any dividends for any financial year. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Laxmi Cotspin, and Spright Agro as their listed peers. They are trading at a P/E of NA and 130.0 (as of September 06, 2024). However, they are not comparable on an apple-to-apple basis.

MERCHANT BANKER'S TRACK RECORD:
This is the 8th mandate from Fast Track in the last four fiscals (including the ongoing one), out of the last 7 listings, all listed with premiums ranging from 0.14% to 201.21% on the date of listing.