Marvel Decor NSE SME IPO review (May apply)

Marvel Décor Ltd. (MDL) is engaged in manufacturing venetian blinds components and supplying it to the companies making venetian blinds. It also started manufacturing curtain rods and created a brand name “Marvel”. Later on it also ventured into roller blinds required by furnishing stores. It also added manufacturing of Bamboo, Vertical and Wooden Venetian blinds. It pioneers in introducing 9 blinds range at one single bound.  It also introduces “Gallery” concept for marketing of its products. Currently it has 338 galleries in 224 cities of 24 states. It enjoys PAN India presence. Its Roller, Roman, Luzon and Vertical blinds are having higher demand in window furnishings.

To part finance its repayment of unsecured loans from promoters, working capital, general corpus fund needs, MDL is coming out with a maiden IPO of 4616000 equity shares of Rs. 10 each at a fixed price of Rs. 57 per share to mobilize Rs. 26.26 crore. Issue opens for subscription on 12.03.18 and will close on 15.03.18. Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. It has reserved 100000 shares for eligible employees and is offering a discount of Rs. 5 per share. Post allotment, shares will be listed on NSE SME Emerge. Issue constitutes 27.09% of the post issue paid up equity capital of the company. Issue is solely lead managed by Sarthi Capital Advisors Pvt. Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Its entire equity is issued at par. It has also issued bonus shares in the ratio of 1 for 1 in February 2010, 1 for 1 in March 2011, 2 for 1 in March 2012, 1 for 2 in March 2013 and 13 for 10 in Sept. 2017. Post issue its current paid up equity capital of Rs. 12.42 crore will stand enhanced to Rs. 17.04 crore. Average cost of acquisition of shares by promoters is Rs. 0.48 and Rs. 0.57 per share.

On performance front, MDL posted turnover/net profits of Rs. 27.74 cr. / Rs. 1.51 cr. (FY14), Rs. 22.41 cr. / Rs. 1.29 cr. (FY15), Rs. 28.80 cr. / Rs. 0.84 cr. (FY16) and Rs. 30.16 cr. / Rs. 1.30 cr. (FY17). For first half of the current fiscal, it has earned net profit of Rs. 1.42 cr. on a turnover of Rs. 17.74 cr. Thus last eighteen month results appear to have been cooked up before IPO. It suffered a setback for FY15 and posted lower net despite higher top line for FY 16. For last three fiscals it posted an average EPs of Rs. 0.92 and an average RoNW of 9.67%. Issue is priced at a P/BV of 5.63 on the basis of its NAV of Rs. 10.13 as on 31.03.17 and at a P/BV of 2.5 on the basis of post issue NAV of Rs. 22.84. If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 34 plus. It has no listed peers to compare with. Pricing of the issue appears on the higher side.

On the merchant banker’s front, this is the 30th mandate in last three fiscals. Out of last 10 listings, 2 opened at discount to offer price, 2 at par, 5 with a premium ranging from 4% to 20% and 1 main board IPO with a premium of 140% on the listing day.