Inflame Applicances BSE SME IPO review (May apply)

Inflame Appliances Ltd. (IAL) is engaged in manufacturing of LPG Gas Stove/cooktops and Sheet Metal Components and is an IS 4246:2002 certified company. Its product range includes Gas Stove in Sheet Metal, Gas Stove with Toughed Glass (Optional Auto Ignition) with range of 4 Burners/ 3 Burners/ 2 Burners and Sheet Metal Components for captive consumption. It has marketing arrangements with Indian Oil Corporation of India, HPCL and BPCL. IAL’s products are sold under brand names like “Hindware” and “Avaante”. Company is also part of Prime Minister Ujjwala Yojna (PMUY) for providing 5 crore new gas connections to the people below poverty line in the country and is gearing to supply 3 crore new connections under “Ujjwala Plus” plan.  

To part finance its capital expenditure, working capital and general corpus fund needs,  IAL is coming out with a maiden IPO of 1200000 equity shares of Rs. 10 each at a fixed price of Rs. 54 per share to mobilize Rs. 6.48 crore. Issue opens for subscription on 06.03.18 and will close on 08.03.18. Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue is solely lead managed by Swastika Investmart Ltd. and Skyline Financial Services Pvt. Ltd. is the registrar to the issue. Issue constitutes 30% of the post issue paid up capital of the company. Having issued initial equity at par, it raised further equity at a price of Rs. 55 per share and has also issued bonus shares in the ratio of 3 for 5 in January 2018. Post issue, its current paid up capital of Rs. 2.80 crore will stand enhanced to Rs. 4.00 crore. Average cost of acquisition of shares by the promoters is Rs. 6.25, Rs. 8.24 and Rs. 11.40 per share.

On the performance front, IAL has posted turnover/net profits of Rs. 3.92 cr. / Rs. 0.06 cr. (FY16) and Rs. 18.06 cr. / Rs.0.46 cr. (FY17). For the period ended on 20th January 2018 it has earned net profit of Rs. 0.80 cr. on a turnover of Rs. 25.42 cr. For last three fiscals, it has posted an average EPS of Rs. 1.06 and an average RoNW of 20.02% on an equity base of Rs. 0.80 crore. Issue is priced at a P/BV of 3.97 based on its NAV of Rs. 13.59 as on 20.01.18 and at a P/BV of 2.23 on the basis of its post issue NAV of Rs. 24.17. If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 22, against its listed peers like IFB Industries and TTK Prestige trading at a P/E of 89 and 29 respectively as on 01.03.18. Thus issue appears fully priced.

On merchant banker’s front, this is the 12th mandate from its stable in last three years. Out of last 10 listings, 1 opened at discount to offer price and the rest with a premium ranging  from 5% to 20% on the day of listing.