Review By Dilip Davda on March 18, 2020
• LGHL that was primarily in Gold ornament business has now diversified into real estate.
• Financial data shows inconsistency in bottom lines.
• Both segments are fragmented and there are many unorganized players.
• Based on FY20 earnings, the issue is priced aggressively.
ABOUT COMPANY:
Laxmi Goldorna House Ltd. (LGHL) is an ISO 9001:2015 certified Company and has started its journey in the year 2010 with the business of gold jewellery and ornaments which includes wholesale and retail trading of all types of jewellery items. Also, the company processes some of its jewellery through job work. With continuous growth in jewellery and ornaments business, it has diversified its business activity in real estate in the year 2017 which includes the construction of commercial and residential Projects by adding real estate business in its main Object in Memorandum of Association. Thus the company has diversified into the unrelated business that is crippled with many issues that have dented the sentiment for real estate counters.
ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for working capital (Rs. 7.00 cr.) and general corpus fund (Rs. 0.88 cr.), LGHL is coming out with a maiden IPO of 5520000 shares of Rs. 10 each at a fixed price of Rs. 15 per share to mobilize Rs. 8.28 cr. The issue opens for subscription on 20.03.20 and will close on 26.03.20. Minimum application is to be made for 8000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Issue constitutes 26.45% of the post issue paid-up capital of the company.
The issue is solely lead managed by Beeline Broking Ltd. while KFin Technologies Pvt. Ltd. is the registrar to the issue. Beeline Broking Ltd. is also acting as a market maker for this IPO. LGHL is spending Rs. 0.40 cr. for this IPO process. Post issue LGHL's current paid-up equity capital of Rs. 15.35 cr. will stand enhanced to Rs. 20.87 cr. It mulls a market cap of Rs. 31.31 cr. post this issue.
Having issued initial equity at par, LGHL has also issued/converted equity shares in the price range of Rs. 50 to Rs. 65 between March 2010 and September 2017. It has also issued bonus shares in the ratio of 4 shares for every 1 share held in August 2017. The average cost of acquisition of shares by the promoters is Rs. 9.64 and Rs. 15.16 per share.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, LGHL has reported turnover/net profits of Rs. 52.43 cr. / Rs. 0.58 cr. (FY17), Rs. 69.77 cr. / Rs. 0.44 cr. (FY18) and Rs. 73.45 cr. / Rs. 0.67. (FY19). For the first half of FY20, it has earned a net profit of Rs. 0.40 cr. on a turnover of Rs. 38.78 cr. Despite the growth in top lines, the bottom line has shown inconsistency.
For the last three fiscals, LGHL has posted an average EPS of Rs. 1.78 and an average RoNW of 4.33%. The issue is priced at a P/BV of 1.01 based on its NAV of Rs. 15.12 as on 30.09.19 as well as post issue NAV of Rs. 15.09. If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 39 making it aggressively priced. LGHL has not declared any dividend in the past five financial years.
COMPARISION WITH LISTED PEERS:
As per offer documents, LGHL has shown Vaibhav Global and Narbada Gems as its listed peers. They are currently trading at a P/Es of around 81 and 9 (as on 18.03.20). However, they are not strictly comparable on an apple to apple basis.
MERCHANT BANKER'S TRACK RECORD:
On merchant banker's front, this is the 5th mandate from its stable. All the last four listings have opened at premiums ranging from 1.37% to 10% on the day of listings.
Review By Dilip Davda on March 18, 2020
Dilip Davda is a veteran financial journalist associated with the Indian stock market since 1978. He has been contributing to print and electronic media on capital markets, insurance, and finance since 1985.
He is widely recognized for reviewing public issues and non-convertible debentures (NCDs) in the primary market. Drawing on over three decades of market experience and close interaction with merchant bankers, his reviews focus on detailed fundamental and financial analysis of companies, with a special emphasis on SME public issues.
Dilip Davda
SEBI Registered Research Analyst – Mumbai
Registration No.: INH000003127 (Perpetual)
Email: dilip_davda@rediffmail.com
Disclaimer: The information provided herein is solely for educational and informational purposes and does not constitute an offer, solicitation, or recommendation to buy or sell any securities. Readers are advised to consult a qualified financial advisor before making any investment decisions. Investments in the securities market are subject to market risks. The author does not intend to invest in the securities discussed.
The initial public offer (IPO) of Laxmi Goldorna House Ltd. offers an early investment opportunity in Laxmi Goldorna House Ltd.. A stock market investor can buy Laxmi Goldorna House IPO shares by applying in IPO before Laxmi Goldorna House Ltd. shares get listed at the stock exchanges. An investor could invest in Laxmi Goldorna House IPO for short term listing gain or a long term.
Read the Laxmi Goldorna House IPO recommendations by the leading analyst and leading stock brokers.
Laxmi Goldorna House IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Laxmi Goldorna House IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts mentioned in the above answer to "How is Laxmi Goldorna House IPO?"
Our recommendation for Laxmi Goldorna House IPO is to subscribe for long term.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Laxmi Goldorna House IPO.
The Laxmi Goldorna House IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit Laxmi Goldorna House IPO allotment status to check.
