Jash Engineering NSE SME IPO review (Apply)

Jash Engineering Ltd. (JEL) is engaged in manufacturing of water control gates, flap valves, knife gates valves, energy dissipating valves, water hammer control valves, fine and coarse screens, screening conveying equipment, screening washing and compaction equipment, industrial valves for bulk solids handling, hydro power screw generator, screw pump and process equipment like detritors, clarifiers, clariflocculators, thickeners, decanters aerators, trickling filters, dissolved air flotation (DAF) units, rotary drum slackers, rake classifiers, pressure sand filters, etc. for water, water waste and effluent treatment plants. Thus it offers a single stop solution under one roof including Design, Casting, Fabrication, and Assembly & Testing and provides the most varied range of these products in largest possible sizes. To ensure this, JEL is continuously investing in its manufacturing capability as well as in development of new products & technologies either on its own or through collaboration with suitable technology partners and leaders in the trade. The products of JEL finds application in water intake systems, water and waste water pumping stations and treatment plants, storm water pumping stations, water transmission lines, power, steel, cement, paper & pulp, petrochemicals, chemical, fertilizers and other process plants.

To part finance its setting up of new manufacturing plant for proposed Unit IV on leased land, expansion of Unit III facility, working capital and general corpus fund needs, JEL is coming out with a maiden IPO of 4000800 equity share of Rs. 10 each via book building route with a price band of Rs. 115 – 120 to mobilize Rs. 46.01 to 48.01 crore based on lower and upper price bands. Issue consists of 2261198 fresh equity share issue and 1739602 shares by offer for sale. Issue opens for subscription on 28.09.17 and will close on 03.10.17. Minimum application is to be made for 1200 shares and in multiples thereon, thereafter. Post allotment shares will be listed on NSE SME Emerge. Issue is solely lead managed by Systematix Corporate Services Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue. Issue constitutes 33.80 % of post issue paid up equity capital of the company. From incorporation till March 1999 it issued equity shares at par. Thereafter, it raised further equity in a price range of Rs. 20 to Rs. 97.16 per share between December 2008 and September 2012. It has also issued bonus shares in the ratio of 4 for 1 in October 1994. Post issue, its current paid up equity capital of Rs. 9.58 crore will stand enhanced to Rs. 11.84 crore. Cost of acquisition of shares by promoters ranging from Rs. 15.39 to Rs. 19.73 per share.

On performance front, JEL has (on consolidated basis) posted turnover/net profits of Rs. 113.91 cr. / Rs. 7.73 cr. (FY14), Rs. 119.82 cr. / Rs. 7.62 cr. (FY15), Rs. 121.94 cr. / Rs. 7.28 cr. (FY16) and Rs. 161.16 cr. / Rs. 10.26 cr. (FY17). For FY 15 and 16 it witnessed pressure on margins despite improved top line and higher other income. JEL has posted an average EPS of Rs. 9.22 and average RoNW of 11.17% for last three fiscals. Issue is priced at a P/BV of 1.37. It has no listed peers to compare with. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of around 14. Issue appears to have been fully priced.

On merchant banker's front, this is the first mandate from its stable and has no track record.