Review By on June 15, 2019
• PEL is trading in cut and polished diamonds and gold jewellery.
• This sector is highly competitive and currently not fancied by investors.
• The issue is priced very aggressively at around 45 P/E.
• Merchant Banker has an average track record.
ABOUT COMPANY:
Parshva Enterprises Ltd. (PEL) is engaged in the wholesale and trading business of cut and polished diamonds and gold jewellery. The company buys and sells diamonds of different categories depending on fancy colour, size, shape and cut. Among cuts Princess-cut, Round-cut and Heart-cut are some known patterns. Diamonds prices are based on size and cut evaluations. PEL majorly deals in natural diamonds and sells it in domestic markets only. However, PEL primarily sells gold jewellery such as Chains, Bangles, Necklace, Pendant, Bracelet, Earrings etc. It is also investing in real estate properties in Gujarat and Maharashtra with a focus on the middle and higher end of markets for trading gains.
ISSUE DETAILS/CAPITAL STRUCTURE:
To part finance its working capital (Rs. 3.45 cr.) needs, PEL is coming out with a maiden IPO of 810000 equity shares of Rs. 10 each at a fixed price of Rs. 45 per share to mobilize Rs. 3.65 crore. The issue opens for subscription on 19.06.19 and will close on 21.06.19. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue constitutes 26.91% of the post issue paid up capital of the company. PEL is spending Rs. 0.20 cr. for this issue.
The issue is solely lead managed by Inventure Merchant Banker Services Pvt. Ltd. while Bigshare Services Pvt. Ltd. is the registrar to the issue. Sernet Financial Services Pvt. Ltd. is acting as the market maker for this issue. Having raised initial equity at par, it raised further equity at a price of Rs. 45 per share in March 2019. The average cost of acquisition of shares by the promoters is Rs. 9.92 per share.
Post issue, PEL's current paid up equity capital of Rs. 2.20 cr. will stand enhanced to Rs. 3.01 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, PEL has just 21 months working data. For FY18 from 27.07.17 to 31.03.18, it posted a turnover of Rs.4.77 Cr. with a net profit of Rs.0.04 Cr. and for full FY19 it has earned a net profit of Rs. 0.30 cr. on a turnover of Rs. 7.13 cr.
For the last 21 months, as per average calculations, PEL has posted an average EPS of Rs. 1.09 and an average RoNW of 6.46%. The issue is priced at a P/BV of 3.09 on the basis of its NAV of Rs. 14.55 as on 31.03.19 and at a P/BV of 1.98 on the basis of post issue NAV of Rs. 22.55. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of around 45 against the industry average of 43
COMPARISION WITH LISTED PEERS:
As per offer documents, it has shown Narbada Gems, Lypsa Gems, Goldiam Intl and Swarnasarita Gems as its listed peers that are currently trading at a P/Es of around 39, 74, 15 and 5 (as on 14.06.19). However, they are strictly not comparable on an apple to apple basis.
MERCHANT BANKER'S TRACK RECORDS:
On merchant banker's front, this is the 7th mandate from its stable in last three fiscals. Out of last 6 listings, 1 opened at par, 1 at discount and the rest with premiums ranging from 0.15% to 20% on the day of listings.
PEL has just 21 months working records. The issue is priced very aggressively. Merchant Banker has an average track record. PEL operates in a highly competitive segment. Its current issue size may take a longer time for migration to the main board. Considering all these aspects, investors may skip this issue.
Review By on June 15, 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 Parshva Enterprises Ltd. offers an early investment opportunity in Parshva Enterprises Ltd.. A stock market investor can buy Parshva Enterprises IPO shares by applying in IPO before Parshva Enterprises Ltd. shares get listed at the stock exchanges. An investor could invest in Parshva Enterprises IPO for short term listing gain or a long term.
Read the Parshva Enterprises IPO recommendations by the leading analyst and leading stock brokers.
Parshva Enterprises IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Parshva Enterprises IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts mentioned in the above answer to "How is Parshva Enterprises IPO?"
Our recommendation for Parshva Enterprises IPO is to avoid.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Parshva Enterprises IPO.
The Parshva Enterprises IPO allotment status will be available on or around June 27, 2019. The allotted shares will be credited in demat account by June 28, 2019. Visit Parshva Enterprises IPO allotment status to check.
