Maruti Interior BSE SME IPO review (May apply)

•    MIPL is in manufacturing and marketing of modular kitchen storage systems, wardrobes etc.
•    It has posted an average financial performance so far. 
•    The issue is fully priced based on its FY22 earnings. 
•    The company is in a highly competitive and fragmented segment. 
•    Cash surplus investors may consider investment for the long term. 

ABOUT COMPANY:
Maruti Interior Products Ltd. (MIPL) is into manufacturing and Domestic sale & Export of modular kitchen storage system, Aluminium long wardrobe handle & profile handle. It has a wide range of product offerings for different customer segments. MIPL's Brand Everyday Kitchen is focused on economic range and another brand Spitze by Everyday is offering premium products. It also manufactures products for other companies on an OEM basis. The company was originally incorporated as Ravi Bearings Pvt. Ltd. and subsequently, it changed its name and business. 

The company has an in-house team of designers who look after product development and quality control. All products manufactured by MIPL are designed in-house and tested to maintain product quality standards. The company is also going to introduce wardrobe hardware like sliding door fittings and also planning to enter into the kitchen appliances segment. It will be starting with small appliances like Hand blenders, Blenders, Electric Grills, Toasters, Air Fryers, induction cookers, coffee makers, electric kettles, personal grooming products like trimmers, shapers, hair during, hair straightener, hair cutting equipment etc. 

Gradually it will also introduce big appliances like Chimneys, In-built ovens, dishwashers, cooktops, induction tops, etc. Apart from the kitchen and wardrobe field, it is also planning to launch a premium brand in the segment of DENIM & Eye Wear Products (Garment & Fashion Industry). It will be launched within 2-3 months. That will be 100% online selling with online brand building. With all these products and projects, MIPL will achieve a turnover of around Rs. 100 cr. within next 5-6 years. The company employed 89 employees as of November 30, 2021.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for setting up of Nickel/Chrome plating plant/Powder coating plant with related machinery (Rs. 6.65 cr.), working capital (Rs. 2.85 cr.) and general corporate purpose (Rs. 0.90 cr.), MIPL is coming out with a maiden IPO of 2000000 equity shares of Rs. 10 each at a fixed price of Rs. 55 per share to mobilize Rs. 11.00 cr. Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. The issue opens for subscription on February 03, 2022, and will close on February 08, 2022. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.49% of the post issue paid-up capital of the company. MIPL is spending Rs. 0.60 cr. for this IPO process.

The issue is solely lead managed by ISK Advisors Pvt. Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Sunflower Broking Pvt. Ltd. is the market maker for this company. 

So far the company has issued entire equity capital at par and has also issued bonus shares in the ratio of 36 for 1 in September 2021. The average cost of acquisition of shares by the promoters is Rs. 0.24 and Rs. 10.23 per share. 

Post-IPO, MIPL's current paid-up equity capital of Rs. 5.50 cr. will stand enhanced to Rs. 7.55 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 41.53 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, MIPL has posted turnover/net profits of Rs. 11.85 cr. / Rs. 0.98 cr. (FY19), Rs. 18.19 cr. / Rs. 2.29 cr. (FY20) and Rs. 15.23 cr. / Rs. 1.55 cr. (FY21). For H1 of FY22 ended on September 30, 2021, it has earned a net profit of Rs. 1.65 cr. on a turnover of Rs. 11.48 cr. According to management, more diversified and premium range product launch has attributed to higher margins for the first half and these trends will continue. 

For the last three fiscals, the company has posted an average EPS of Rs. 3.05 and an average RoNW of 19.12%. The issue is priced at a P/BV of 2.60 based on its NAV of Rs. 21.19 as of September 30, 2021, and at a P/BV of 1.82 based on its post-IPO NAV of Rs. 30.15.

If we annualize FY22 earnings and attribute it on a fully diluted post IPO equity base, then the asking price is at a P/E of around 12.59 thus making it a fully priced bet. 

COMPARISON WITH LISTED PEERS:
As per offer documents, MIPL has no listed peers to compare with. 

DIVIDEND POLICY:
The company has paid a dividend of 10% (on a pre-bonus equity base) for FY21. It will adopt a prudent dividend policy post listing based on its financial performance and future prospects. 

MERCHANT BANKER'S TRACK RECORDS:
This is the 2nd mandate from ISK Advisors Pvt. Ltd. in the last two fiscals (including the ongoing one). The only listing that took place so far opened at a premium of 1.86% on the day of listing.