Mahip Industries BSE SME IPO review (May apply)

•    MIL is a manufacturer of high-quality packaging materials.
•    It provides varied products under one roof.
•    Catering to industries in the nearby region.
•    Issue pricing appears reasonable at 10 P/E.
•    LM has average track records.

ABOUT COMPANY:
Mahip Industries Ltd. (MIL) is originally incorporated as 'Care Beverages (India) Limited' at Ahmedabad in 1995, In September 2001 its name was changed to Care Corupack Ltd, and as Mahip Industries Ltd. in January 2018. Currently, it is engaged into manufacturing of high-quality packaging materials to various industries and has constantly upgraded technology and range with modernized equipment and advanced technology. The company is certified by ISO 9001 and ISO 22000 (Quality Management System) Certifications from JAZ ANZ (+).

MIL's Product Portfolio includes the diversified variety of which is customized corrugated box packing, printing on a corrugated box which are used in various industries. It includes Staggered, Box, Corrugated Boxes, Corrugated Boxes with Partition, Corrugated Boxes With Lid, Printed Corrugated Boxes, Customized Corrugated Boxes, Laminated Corrugated Boxes, Bituminized corrugated boxes, Corrugated Cartons/Printed, Corrugated Cartons, Heavy Duty Corrugated Boxes, Multicolor Printed Cartons, Corrugated Sheets, Corrugated Paper Rolls, Auto Slot Boxes & Die Cut Boxes etc are widely used majorly in all type of Industry/Sector. Thus MIL serves as a single vendor to many of its customers i.e. textile units, movers and packers and other industrial units etc in a nearby region.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its working capital and general corporate fund needs, MIL is coming out with a maiden IPO of 5196000 equity shares of Rs. 10 each at a fixed price of Rs. 32 per share to mobilize Rs. 16.63 crore. The issue opens for subscription on 26.02.19 and will close on 01.03.19. Minimum application is to be made for 4000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue is solely lead managed by Finshore Management Services Ltd. while Bigshare Services Pvt. Ltd. is the registrar to the issue. Airan Finstocks Pvt. Ltd. will be the market maker for the company. Issue constitutes 27.01% of the post issue paid up capital of the company. Having raised initial equity at par, MIL issued further equity in the price range of Rs.100 to Rs. 190 per share between March 2008 and October 2017. It has also issued bonus shares in the ratio of 5 for 1 (January 2018) and 1 for 1 (June 2018). The average cost of acquisition of shares by the promoters is Rs. 1.80 and Rs. 2.35 per share. Post issue, MIL's current paid up equity capital of Rs. 14.04 cr. will stand enhanced to Rs. 19.24 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for last four fiscals, MIL has (on a consolidated basis) has posted turnover/net profits of Rs. 93.09 cr. / Rs. 0.94 cr. (FY15), Rs. 104.40 cr. / Rs. 1.12 cr. (FY16), Rs. 107.83 cr. / Rs.1.22 Cr. (FY17) and Rs. 140.78 cr. / Rs. 4.29 cr. (FT18). For the first five months of FY19 ended on 31.08.18, it has earned a net profit of Rs. 2.54 cr. on a turnover of Rs. 64.72 cr. According to management, jump in the top and bottom lines from FY18 is a result of expansion/diversification going into commercial production as the company enhanced in last three years its product base from Outer Box to Inner Box and mono packing materials with the gradual increase in capacity utilization.


For last three fiscals, MIL has posted (on a consolidated basis) an average EPS of Rs. 2.04 and an average RoNW of 13.35%. The issue is priced at a P/BV of 1.79 on the basis of its NAV of Rs. 17.91 as on 31.08.18 and at a P/BV of 1.47 on the basis of post issue NAV of Rs. 21.71.

If we annualize latest earnings and attribute it on fully diluted post issue equity, then asking price is at a P/E of around 10 thus issue appears reasonably priced.  

COMPARE WITH LISTED PEERS:
As per offer documents, MIL has shown Worth Peripherals as its listed peer that is currently trading at a P/E of around 16. (As on 22.02.2019).

MERCHANT BANKER'S TRACK RECORD:
On merchant banker's front, this is the 9th mandate from its stable in last three fiscals. Out of last 7 listings, 3 opened at discount, 4 with a premium ranging from 0.21% to 20.6% on the day of listing. Thus it has an average track record.