Ganga Bath NSE SME IPO review (Avoid)

•    The company is engaged in the manufacturing and trading of bathroom accessories and fittings.
•    It posted almost static top lines for FY23 and FY24, but reported boosted margins from FY24 onwards.
•    Based on its financial data so far, the issue appears aggressively priced. 
•    There is no harm in skipping this “High Risk/Low Return” pricey bet.

ABOUT COMPANY:
Ganga Bath Fittings Ltd. (GBFL) erstwhile known as Ganga Plast Industries LLP., got converted to public limited company in the month of May 2024 and changed its name to existing one. Currently, the company is engaged in the business of manufacturing and supplying Bathroom Accessories including but not limited to bath fittings items such as CP taps and their parts, showers, bath accessories, Sanitary wear, ABS Shower, ABS Health faucet, ABS Taps, ABS Accessories, PTMT Taps, Door Handles, Bathroom Vanities, Bathroom Sinks, SS Showers, Shower Drains, SS Channel Drainer etc.

The products are sold under the brand names of “Ganga”, “Glimpse”, “Stepian”, and “Tora”. It is also trading in sanitary ware products under “Ganga” brand. According to the management, it generates around 80% revenue from manufacturing activities and balance from trading activities.

As of the date of filing this offer document, it had 125 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 6663000 equity shares of Rs. 10 each to mobilize Rs. 32.65 cr. at the upper cap. It has announced a price band of Rs. 46 – Rs. 49 per share. The issue opens for subscription on June 04, 2025, and will close on June 06, 2025. The minimum number of shares to be applied is for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 30% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 18.95 cr. capex on purchase of equipments/machineries etc., Rs. 5.33 cr. for repayment/prepayment of certain borrowings, Rs. 2.70 cr. for working capital, and the rest for general corporate purposes. 

The IPO is solely lead managed by Jawa Capital Services Pvt. Ltd., and KFin Technologies Ltd., is the registrar to the issue. Rikhav Securities Ltd., is the market maker.

The company has issued initial equity shares at par value, and issued/converted further equity capital in the price range of Rs. 79 – Rs. 34345 per share during June 2024. It has also issued bonus shares in the ratio of 387 for 1, and 15 for 10, in June 2024. The average cost of acquisition of shares by the promoters is Rs. 6.19, Rs. 13.74, and Rs. 14.78 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 15.54 cr. will stand enhanced to Rs. 22.21 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 108.82 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a standalone basis) posted a total income/net profit of Rs. 10.70 cr. / Rs. 0.01 cr. (FY22), Rs. 12.18 cr. / Rs. 0.09 cr. (FY23), Rs. 13.68 cr. / Rs. 0.59 cr. (FY24). For 9M of FY25 ended on December 31, 2024 (with two broken periods) it earned a net profit of Rs. 3.84 on a total income of Rs. 24.84 cr. The sudden boost in its top and bottom lines for 9M of FY25 i.e., pre-IPO period appears to be a window dressing to fetch fancy premium. The company marked almost static performance with minuscule profits from FY22 to FY24.

On a consolidated basis, the company has posted a total income/net profit of Rs. 22.35 cr. / Rs. 0.21 cr. (FY22), Rs. 30.68 cr. / Rs. 0.31 cr. (FY23), Rs. 32.01 cr.  / Rs. 2.48 cr. (FY24), and for 9M of FY25 ended on December 31, 2024, it earned a net profit of Rs. 4.53 cr. on a total income of Rs. 32.31 cr. Boosted profits for pre-IPO period raise eyebrows and concern over its sustainability going forward.

For the last three fiscals, the company has reported an average EPS of Rs. 0.99 and an average RoNW of 9.92%. The issue is priced at a P/BV of 2.95 based on its NAV of Rs. 16.61 as of December 31, 2024, but the offer documents is missing its post-IPO NAV data.

If we attribute FY25 annualized super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 18.01. Based on FY24 earnings, the P/E stands at 43.75. The issue relatively appears aggressively priced.

For the reported periods, the company has (on a standalone basis) posted PAT margins of 0.07% (FY22), 0.76% (FY23), 4.38%, (FY24), 9.95% and 16.06% (9M- FY25 – two broker periods), and RoCE margins of 22.70%, 141.20%, 358.93%, 148.17% and 21.91% (for two broken periods) respectively for the referred periods.  

DIVIDEND POLICY:
The company has not declared any dividends since incorporation. It will adopt a prudent dividend policy post listing, based on its financial performance and future prospects. 

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown Hindware Home, Cera Sanitary, as their listed peers. They are trading at a P/E of NA, and 33.4 (as of May 30, 2025). However, they are not truly comparable on an apple-to-apple basis.

MERCHANT BANKER’S TRACK RECORD:
This is the 7th mandate from Jawa Capital in the last two fiscals including the ongoing one.  From the last 6 listings, 4 listed at discount, 1 at par and 1 listed with a premium of 50% on the listing date. Thus, it has a poor track record.