Review By Dilip Davda on September 19, 2019
• MEL is engaged in the manufacturing of front-loading washers. A highly competitive field.
• Based on average financial data, asking price is aggressive.
• Peers list is highly surprising as it includes Whirlpool, Voltas and Blue Star.
• Merchant Banker has average track records.
ABOUT COMPANY:
Misquita Engineering Ltd. (MEL) is engaged in the manufacturing of the front-loading washers. The Company faces competition from established Indian and International Establishments. It intends to continue competing vigorously to capture more market share
ISSUE DETAILS/CAPITAL HISTORY:
To part finance its payment/repayment of certain debts (Rs. 0.25 cr.) and working capital needs (Rs. 0.50 cr.), MEL is coming out with a maiden IPO of 716000 equity shares of Rs. 10 each at a fixed price of Rs. 27 per share to mobilize Rs. 1.93 cr. It comprises fresh equity issue of 444000 shares (Rs. 1.20 cr.) and offer for sale of 272000 shares (Rs. 0.73 cr.). The issue opens for subscription on 23.09.19 and will close on 25.09.19. Minimum application is to be made for 4000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue constitutes 26.58% of the post issue paid-up capital of the company.
The issue is solely lead managed by Gretex Corporate Services Pvt. Ltd. while Bigshare Services Pvt. Ltd. is the registrar to the issue. Gretex Share Broking Pvt. Ltd. is the market maker for this issue. Having issued initial equity at par, it converted further equity at a price of Rs. 13.50 per share in the month of March 2017 and has also issued bonus shares in the ratio of 19 for 1 in February 2017.MEL is spending Rs. 0.45 cr. to mobilize the issue proceeds.
The average cost of acquisition of shares by the promoters is Rs. 0.50 and Rs. 10.37 per share.
Post issue, MEL's current paid-up equity capital of Rs. 2.25 cr. will stand enhanced to Rs. 2.69
cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, MEL has posted turnover/net profits of Rs. 5.77 cr. / Rs. 0.16 cr. (FY17), Rs. 6.77 cr. / Rs. 0.25 cr. (FY18) and Rs. 7.61 cr. / Rs. 0.42 cr. (FY19). For the last three fiscals, it has posted an average EPS of Rs. 1.57 and an average RoNW of 8.76% Issue is priced at a P/BV of 1.58 based on its NAV of Rs. 17.08 as on 31.03.19 and at a P/BV of 1.44 based on post issue NAV of Rs. 18.71. If we consider FY19 earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 17.3. Thus the issue is aggressively priced.
COMPARISION WITH LISTED PEERS:
As per offer documents, MEL has shown Whirlpool, Voltas and Blue Star as its listed peers. They are not at all strictly comparable on an apple to apple basis. This list of peers is really surprising. Currently, these peers are trading at a P/Es of around 49, 42 and 47 (as on 19.09.19 closing).
MERCHANT BANKER'S TRACK RECORDS:
On merchant banker's front, this is the 18th mandate from its stable in last four fiscals (including the ongoing). Out of last 10 listings, 1 opened at par and the rest opened at premiums of 1.32 to 8% on the day of listings. Thu it has average track records.
Review By Dilip Davda on September 19, 2019
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 Misquita Engineering Ltd. offers an early investment opportunity in Misquita Engineering Ltd.. A stock market investor can buy Misquita Engineering IPO shares by applying in IPO before Misquita Engineering Ltd. shares get listed at the stock exchanges. An investor could invest in Misquita Engineering IPO for short term listing gain or a long term.
Read the Misquita Engineering IPO recommendations by the leading analyst and leading stock brokers.
Misquita Engineering IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Misquita Engineering IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts mentioned in the above answer to "How is Misquita Engineering IPO?"
Our recommendation for Misquita Engineering IPO is to avoid.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Misquita Engineering IPO.
The Misquita Engineering IPO allotment status will be available on or around September 30, 2019. The allotted shares will be credited in demat account by October 1, 2019. Visit Misquita Engineering IPO allotment status to check.
