Kritika Wires NSE SME IPO review (May apply)

•    The company is engaged in manufacturing of wires and wire products.
•    Based on industry average parameters, issue appears fully priced.
•    KWL posted consistent growth in top lines.
•    Long term investors may consider for investment.

ABOUT COMPANY:
Kritika Wires Ltd. (KWL) has been in the business of manufacturing high quality galvanized steel wires and wire products and have been meeting the requirement of various clients in the government and private sectors like power, infrastructure, railway and many more industries. The products manufactured by the company are used for transmission and distribution of Electricity, manufacturing of concrete slippers, poles, bridges and other infrastructure facilities. It has two manufacturing units in Howrah at West Bengal.

The company is an ISO 9001: 2008 certified manufacturer and supplier of different types of galvanized and nongalvanized wires. The products are ISI marked which helps in harmonious development of standardization and quality of product. Its products are rigorously tested, in terms of surface finish, tensile strength, torsion, breaking load, zinc coating, dip and adhesion test. Apart from the product testing the Company believes IN-PROCESS testing to meet the prescribed quality standards, and also provide the test as per customer requirement.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its working capital and general corpus fund needs, KWL is coming out with a maiden IPO of 4812000 equity shares of Rs. 10 each at a fixed price of Rs. 32 per share to mobilize Rs. 15.40 cr. Issue opens for subscription on 26.09.18 and will close on 01.10.18. Minimum application is to be made for 4000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Issue constitutes 27.11% of the post issue paid up capital of the company. Issue is solely lead managed by Hem Securities Ltd. while Link Intime India Pvt. Ltd. is the registrar to the issue. Having issued initial equity at par, it raised further equity in the price range of Rs. 40 to Rs. 100 between March 2007 and January 2017. It has also issued bonus shares in the ratio of 1 for 1 in March 2018. Average cost of acquisition of shares by the promoters is Rs. 0.00, Re. 1.00, Rs. 2.07 and Rs. 22.02 per share. Post issue, KWL’s current paid up equity capital of Rs. 12.94 cr. will stand enhanced to Rs. 17.75 cr.

FINANCIAL PERFORMANCE:
On performance front, for last four fiscals, KWL has posted turnover/net profits of Rs. 183.40 cr. / Rs. 0.43 cr. (FY15), Rs. 217.30 cr. / Rs. 1.05 cr. (FY16), Rs. 207.06 cr. / Rs. 2.67 cr. (FY17) and Rs. 257.89 cr. / Rs. 4.94 cr. (FY18). It suffered a setback in top line for FY17 but has shown improved margins. For last three fiscals it has shown average EPS of Rs. 2.76 and an average RoNW of 9.53%. Issue is priced at a P/BV of 1.06 based on its NAV of Rs. 30.14 as on 31.03.18 and at a P/BV of 1.04 based on post issue NAV of Rs. 30.65. If we consider FY18 earnings and attribute it to fully diluted equity post issue, then asking price is at a P/E of around 12 against industry average of 14.

COMPARE WITH LISTED PEERS:
As per offer documents, it has shown Ram Ratna and Geekay Wires at its listed peers that are currently trading at a P/Es of around 13 and 34. Thus issue appears fully priced.

MERCHANT BANKER’S TRACK RECORDS:
On merchant banker’s front, this is the 51st mandate from its stable in last six fiscals. Out of last 10 listings, 2 opened at discount and the rest with a premium ranging from 2.78% to 20% on the day of listing.