Gautam Exim BSE SME IPO review (Apply)

Gautam Exim Ltd (GEL) is engaged in imports of waste paper, pulp and chemicals being the industrial raw materials used by paper mills and chemical units for manufacture of paper namely Kraft paper, Duplex Board, Writing and Printing paper, News print etc. by the paper mills and bulk drug intermediates, printing ink etc. by chemical units. Orders for these raw materials are procured from the paper mills and chemical manufacturing units. Orders for raw materials of paper mills are placed through the Indenting agents of the foreign shippers/bailers as per the conditions/specification as detailed in these indents. Orders for chemical raw material from chemical manufactures are taken from these chemical units and placed directly on the shippers abroad. The shippers, as soon as they load the shipments, against GEL's indents send the original documents on collection basis. Based on the Non-negotiable copies of Import documents received through mail from the shippers, the company enters into High Seas sale agreements for transfer of shipment document on high seas basis to its customers. The Company doesn't have any export obligation as currently it is not exporting any of its products.

To part finance its working capital and general corporate funds need, the company is coming out with a maiden IPO of 831000 equity share of Rs. 10 each with a fixed price of Rs. 40 per share to mobilize Rs.3.32 crore. Issue opens for subscription on 29.06.17 and will close on 03.07.17. 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 Pantomath Capital Advisors Pvt Ltd. and Bigshare Services Pvt Ltd is the registrar to the issue. After having issued equity at par on incorporation, it issued further equity at a price of Rs. 41.25 per share (in March 2010) and has also issued bonus shares in the ratio of 8 for 1 (in March 2017) . Post IPO its current paid up equity capital of Rs. 2.25 crore will stand enhanced to Rs. 3.08 crore.

On performance front, for last four fiscals it has posted turnover/net profits of Rs. 241.55 cr. / Rs. 0.51 cr. (FY13), Rs. 219.43 cr. / Rs. 0.53 cr. (FY14), Rs. 208.84 cr. / Rs. 0.62 cr. (FY15) and Rs. 291.95 cr. / Rs. 0.62 cr. (FY16). For nine months ended on 31.12.16 of the current fiscal, it has posted net profit of Rs. 0.62 crore on a turnover of Rs. 234.59 cr. There is no consistency in top line for last four fiscals. If we annualize the latest earnings and attribute it on fully diluted equity post IPO, then asking price is at a P/E of around 14 plus and P/BV of 1.88 making this issue reasonably priced. Its average RoNW for last three fiscals is 16.31%. According to offer documents, the company has no listed peers to compare with.

On merchant banker's front, this is the 38th mandate from its stable in last three years that have shown mixed trends with average returns in most of the cases. Out of last 10 issues one has closed at par and the rest have closed with some premium to offer prices on listing date.

Conclusion: Investors may consider moderate investment for long term.