Paramount Dye NSE SME IPO review (May apply)

•    The company specializes in recycling of waste synthetic fiber to make yarn out of it. 
•    The company marked growth in its top and bottom lines for reported periods. 
•    As a public limited entity, it has given just under 3 months' financial performance.
•    Based on FY24 annualized numbers, the issue appears fully priced.
•    Considering bright prospects ahead, well-informed investors may park funds for long term.

ABOUT COMPANY:
Paramount Dye Tec Ltd. (PDTL) is a Ludhiana, Punjab-based company, specializing in the manufacturing of yarns by recycling waste synthetic fiber (recycling synthetic waste), serving the B2B segment of the textile industry. It offers a range of products including synthetic fiber and yarns which includes acrylic yarn, polyester yarn, nylon yarn, wool yarn, hand-knitting yarn and acrylic blend yarn with quality, finer impact, and lasting excellence.

At PDTL, it utilizes synthetic waste fibers as primary raw material, transforming them into quality yarn. This process not only enhances industry sustainability but also boosts economic efficiency. Its commitment to environmental responsibility and economic benefits is evident through innovative approach. Through continuous R&D, it has developed advanced technology to recycle pre-consumer waste into premium yarn and fiber. This capability allows it to meet the growing demand for sustainable and circular fashion, solidifying company's market presence. As of the date of this offer document, the company had 37 employees on its payroll.

According to the management, it has succeeded in developing the market acceptable products with using latest technics and untiring efforts to achieve the target product. The company is able to reap the benefits of rising market demand and widening usages of the product in many industries. The proprietorship concern got converted in to a public limited company in January 2024 and hence it has just three months' track record as public entity. But otherwise it has a good profit making track records.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 2430000 equity shares of Rs. 10 each to mobilize Rs. 28.43 cr.  (at the upper cap). It has announced the price band of Rs. 111 - Rs. 117 per share. The issue opens for subscription on September 30, 2024, and will close on October 03, 2024. The minimum application to be made is for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 35.00% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, the company will utilize Rs. 16.00 cr. for setting up of new manufacturing unit, Rs. 4.50 cr. for repayment/prepayment of certain debts, Rs. 1.00 cr. for registry of land purchased from promoters, and the rest for general corporate purposes.

The issue is solely lead managed by Gretex Corporate Services Ltd., Bigshare Services Pvt. Ltd. Is the registrar to the issue, while Gretex group's Gretex Share Broking Is the market maker. The issue is underwritten to the tune of 49.98% by Gretex Corporate, and up to 50.02% by Gretex Share Broking. 

Having converted initial equity shares at par, the company issued further equity shares at a fixed price of Rs.21500.00 in February 2024, and has also issued bonus shares in the ratio of 200 for 1 in June 2024.  The average cost of acquisition of shares by the promoters is Rs. 37.06, and Rs. 65.08 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 4.51 cr. will stand enhanced to Rs. 6.94 cr. Based on the upper cap of IPO price band, the company is looking for a market cap of Rs. 81.23 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last four fiscals, the company has posted a total income/net profit of Rs. 16.91 cr. / Rs. 0.16 cr. (FY21), Rs. 23.67 cr. / Rs. 0.16 cr. (FY22), Rs.  46.00 cr. / Rs. 3.16 cr.  (FY23), and for two broken periods of FY24, i.e. up to 03.01.24 and from 04.01.24 to 31.03.24 it posted a total income and net profit of Rs.  Rs. 29.56 cr. / Rs. 2.79 cr., and Rs. 23.68 cr. / Rs. 3.54 cr. respectively. Thus for entire FY24it has reported a total income of Rs. 53.24 cr. and earned a net profit of Rs. 6.33 cr. 

The company has given financial performance data based on last three months' i.e. from 04.01.24 to 31.03.24 period and thus we are missing its average performance data. Due to this we are unable to work out its P/BV data as well. According to the lead manager, due to just three months working data, they have skipped the data of listed peers. 

If we attribute FY24 super earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 12.84. Based on FY23 earnings, the P/E stands at 25.71. Thus the issue relatively appears fully priced. 

The company reported PAT margins of 0.94% (FY21), 0.67% (FY22), 6.87% (FY23), 9.43% (for period ended on 03.01.24) and 15.06% (for period 04.01.24 to 31.03.24), and RoCE margins of 11.33%, 12.28%, 70.00%, 535.20% and 16.53%, for the referred periods, respectively.

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has not considered info on listed peers as its financial data is only for 3-month period for FY24. 

MERCHANT BANKER'S TRACK RECORD:
This is the 24th mandate from Gretex Corporates in the last three fiscals (including the ongoing one).  From the 10 listings so far, 1 opened at discount, and the rest with premiums ranging from 5.83% and 187.36% on the date of listing.