Lexus Granito NSE SME IPO review (Apply)

Lexus Granito (India) Ltd (LGL) is engaged in manufacturing, trading and marketing of vitrified ceramic tiles and wall tiles for domestic and international markets. LGL was outsourcing wall tiles so far, but now it has set up its own wall tiles manufacturing unit. Company is ISO 9001:2008 certified producer of quality products.

To part finance its working capital and general corpus fund needs, the company is coming out with a maiden IPO of 5760000 equity shares of Rs. 10 each via book building route with a price band of Rs. 41-45 to mobilize Rs. 23.62 to Rs. 25.92 crore (based on lower and upper price band). Issue opens for subscription on 09.08.17 and will close on 11.08.17. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter. Post allotment shares will be listed on NSE SME Emerge. Issue has reservation of 30% for QIBs, 35% for HNIs and 35% for retail categories. Issue is solely lead managed by Pantomath Capital Advisors Pvt Ltd and Bigshare Services Pvt Ltd is the registrar to the issue. Issue constitutes 30% of the fully diluted post issue paid up capital of the company. After initial equity at par for MoA, it raised further equity in a price range of Rs. 20 to Rs. 80 from March 2011 to October 2016. Post issue, its current paid up equity capital of Rs. 13.43 crore will stand enhanced to Rs. 19.19 cr.

On performance front, the company has posted turnover/net profits of Rs. 59.25 cr. / Rs. 0.32 cr. (FY14), Rs. 80.901 cr. / Rs. 2.03 cr. (FY15), Rs. 102.27 cr. / Rs. 3.20 cr. (FY16) and Rs. 164.73 cr. / Rs. 5.09 cr. (FY17). Thus it has shown continued progress in top and bottom lines. However, in FY17 its profit included Rs. 3.57 crore extraordinary item. In absence of it net profit is lower than previous year despite higher top line. LGL is exporting its products to 20 countries. Nearly two third of its revenue comes from export markets. Its last three fiscal’s average EPS is 2.89 and RoNW is 11.46% and at a P/BV of 1.78. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of about 17 (based on higher price band), against peer trading at a P/E of 77. Main board listed companies in this segment are trading at a P/E of 32 plus. But if we remove extraordinary item and attribute it on fully diluted equity then asking price is at a P/E of 56 making it fully priced.

On merchant banker’s front, this is the 42nd mandate from its stable and out of last 10 listings, one opened at par with offer price and nine gave positive opening on the listing day.

Conclusion: Considering the prospects for tiles industry amidst more spending scenario for realty sector going forward, investment in this offer may be considered for long term. (Subscribe).