Iris Clothings NSE SME IPO review (May apply)

•    Iris is manufacturing and marketing kids wears.
•    Products are sold under the brand name 'DoReMe'.
•    ICL’s financial track record is encouraging.
•    Issue is at attractive P/E against industry average.

ABOUT COMPANY:
Iris Clothings Ltd. (ICL) is engaged in the manufacturing, designing, branding and selling of kids wear under the brand name 'DoReMe' in India. This brand caters to the kids wear category mostly juniors including various kinds of apparels and related products for all infants, boys and girls. ICL has been able to establish 'DoReMe' as a mid-market, comfortable and high quality junior kids wear brand. The company makes different kinds of products like Tops, T-shirts, Pants, Shorts, Frock, Dresses and Towels among other catering to kids wear category. ICL continuously strives to add new product lines and innovate with designs to be able to appeal to the changing consumer demands with excellence in both cost and quality.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its working capital and general corpus fund needs, ICL is coming out with a maiden IPO of 1230400 equity shares of Rs. 10 each at a fixed price of Rs. 90 per share to mobilize Rs. 11.07 cr. Issue opens for subscription on 10.10.18 and will close on 12.10.18. Minimum application is to be made for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Issue constitutes 26.40% of post issue paid up capital of the company. Issue is solely lead managed by VC Corporate Advisors Pvt. Ltd. while Cameo Corporate Services Ltd. is the registrar to the issue. Having issued initial equity at par, ICL raised further equity at the price of Rs. 27 and Rs. 38 per share between July 2017 and June 2018. Average cost of acquisition of shares by the promoters is Rs. 2.44 and Rs. 10.45 per share. Post issue, ICL’s current paid up equity capital of Rs. 3.43 cr. will stand enhanced to Rs. 4.66 cr.

FINANCIAL PERFORMANCE:
On financial performance front, for last four fiscals, ICL has posted turnover/net profits of Rs. 30.09 cr. / Rs. 0.24 cr. (FY15), Rs. 36.99 cr. / Rs. 0.65 cr. (FY16), Rs. 46.89 cr. / Rs. 1.60 cr. (FY17) and Rs. 53.10 cr. / Rs. 3.38 cr. (FY18). For Q1 of FY19 it has earned net profit of Rs. 1.17 cr. on a turnover of Rs. 14.85 cr. Thus it has posted steady growth in top and bottom lines. For last three fiscals, it has posted an average EPS of Rs. 6.42 and an average RoNW of 22.33%. Issue is priced at a P/BV of 1.92 based on its NAV of Rs. 46.89 as on 30.06.18 and at a P/BV of 1.70 based on post issue NAV of Rs. 53.00. If we annualize its FY19 earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 9 making it attractively priced issue against industry average of 40.

COMPARE WITH LISTED PEERS:
As per offer documents, it has shown Ashapura Intimate, Indian Terrain, S P Apparels as its listed peers that are currently trading at a P/Es of around  12, 19 and 16 (as on 01.10.18). However, they are not strictly comparable with this company.

MERCHANT BANKER’S TRACK RECORD:
On merchant banker’s front, this is the 4th mandate from its stable in last nine years. Last mandate was in Sept. 2014 of Sirohia & Sons that opened at a discount to offer price on listing day and currently quotes at a discount of around 28%. Even first two mandates of 2010 and 2012 opened at discount and except for the first one, others are quoting at discount as per last quotes. Thus it has poor track record.