Jiwanram Sheoduttrai NSE SME IPO review (May apply)

•    JSIL is in the business of manufacturing and marketing gloves and industrial safety products.
•    It marked a quantum jump in its top and bottom lines for FY23.
•    The company is operating in a highly competitive and fragmented segment.
•    Higher spending of 16.17% indicates the fully structured mode of this IPO.
•    Well-informed investors may park funds for medium to long-term rewards.

ABOUT COMPANY:
Jiwanram Sheoduttrai Industries Ltd. (JSIL) is engaged in the manufacturing and export of Industrial Safety Gloves and Garments which provide customized solutions in the field of Industrial Safety. The endeavour is complimented by the manufacturing facilities at Baruipur, Nandankanan and Falta SEZ West Bengal. Its Products are well accepted for their quality which covers all manufacturing ranges of Gloves, Industrial Garments and other protective PPEs and solution baskets for Industrial Safety. 

The company is majorly engaged in the business of manufacturing and exporting for various brands. JSIL began manufacturing PPEs in 1997 and has since grown to establish manufacturing facilities and export to countries such as the United States of America, Spain, Germany, and Belgium. The company has differentiated its business lines to make the most of its in-house potential. Over the past two decades, JSIL has made its presence known around the world, particularly in Europe, America, and the Middle East, and has expanded to over twenty countries. JSIL is a globally renowned manufacturer of Industrial Garments and Gloves and an exporter of head-to-toe safety wear, workwear, and more.

JSIL initially started manufacturing industrial safety gloves and gradually expanded its presence in the industrial garment sector. The company's commitment to producing quality products has helped it maintain its position in the market and establish sustainable relationships with overseas buyers.

Currently, the Company has not been manufacturing any product and thereby not generated any revenue from the Nandankanan Unit in the last 3 Financials years in order to curtail fixed costs thereby reducing the cost of production per product. Also, the Company has sufficient capacity in the remaining two units and now the Company has started working on its marketing strategies to increase the demand and take the optimum utilization from the overall capacity. As of March 31, 2023, it had 157 employees on its payroll. It also engages contract labourers as and when needed and such numbers keep varying. The company is operating in a highly competitive and fragmented segment.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden IPO of 7422000 equity shares of Rs. 10 each at a fixed price of Rs. 23 per share to mobilize Rs. 17.07 cr. The issue opens for subscription on September 08, 2023, and will close on September 12, 2023. The minimum application to be made is for 6000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 29.99% of the post-IPO paid-up capital of the company. JSIL is spending Rs. 2.76 cr. (16.17%) for this IPO process and from the net proceeds, it will utilize Rs. 9.11 cr. for working capital, Rs. 2.00 cr. for prepayment/repayment of certain borrowings, and Rs.3.20 cr. for general corporate purposes. Higher spending indicates the fully structured mode of this IPO. 

Affinity Global Capital Market Pvt. Ltd. is the sole lead manager and Cameo Corporate Services Ltd. is the registrar of the issue. Giriraj Stock Broking Pvt. Ltd. is the market maker for the company. 

The company has issued its entire equity capital at par value and has also issued bonus shares in the ratio of 2.5 for 1 in August 2022. The average cost of acquisition of shares by the promoters is Rs. 2.86, Rs. 3.49, Rs. 4.92, and Rs. 19.37 per share. 

Post-IPO, JSIL's current paid-up equity capital of Rs. 17.33 cr. will stand enhanced to Rs. 24.75 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 56.92 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, JSIL has posted a total income/net profit of Rs. 32.81 cr. / Rs. 0.03 cr. (FY21), Rs. 34.15 cr. / Rs. 1.50 cr. (FY22), and Rs. 45.98 cr. / Rs. 4.03 cr. (FY23). 

For the last three fiscals, JSIL has reported an average EPS of Rs. 1.45 and an average RoNW of 0.05%. The issue is priced at a P/BV of 0.83 based on its NAV of Rs. 27.72 as of March 31, 2023, and at a P/BV of 0.88 based on post-IPO NAV of Rs. 26.30 per share. 

If we attribute FY23 earnings to the post-IPO paid-up capital of the company, then the asking price is at a P/E of 14.11. Thus the issue appears fully priced based on super performance for the concluded fiscal.

For the last three fiscals, the company's PAT margins were 0.10% (FY21), 4.39% (FY22), and 9.52% (FY23), and RoE margins were 0.07% (FY21), 3.38% (FY22), and 8.38% (FY23).

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy based on financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has no listed peers to compare with. As per exchange data, Mallcom can be the listed peer for JSIL. It is currently trading at a P/E of 19.22 (as of September 05, 2023). However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKER'S TRACK RECORD:
This is the 2nd mandate from Affinity Global in the current ongoing fiscal. The only listing that took place so far marked opening at par on the listing date.