Review By Dilip Davda on March 21, 2018
Penta Gold Ltd. (PGL) is a retailer, wholesaler and exporter of gold jewellery. It has a retail outlet in Mumbai. PGL primarily sell gold jewellery i.e. Chains, Rings, Bangles, Necklace, Mangalsutra, Bracelet, Earrings and other jewellery studded or non-studded with pearls, diamonds, American diamonds and other precious stones. Further, it also has product line of antique and kundan Jewellery and variety of Italian jewellery products which is famous for its machine designs and light weighted jewellery.
To part finance its working capital and general corpus fund needs, PGL is coming out with a maiden IPO of 3600000 equity shares of Rs. 10 each at a fixed price of Rs.37 per share to mobilize Rs. 13.32 crore. Issue opens for subscription on 23.03.18 and will close on 27.03.18. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter. Post allotment shares will be listed on NSE SME Emerge. Issue is solely lead managed by Inventure Merchant Banker Services Pvt. Ltd. and Karvy Computershare Pvt. Ltd. is the registrar to the issue. Issue constitutes 28.29% of the post issue paid up capital of the company. Having raised initial equity at par, it raised further equity in the price range of Rs. 40 and Rs. 50 per share and has also issued bonus shares in the ratio of 1 for 1 in December 2016. Average cost of acquisition of shares by the promoters is Rs. 9.59 per share. Post issue, its current paid up equity capital of Rs. 9.13 cr. will stand enhanced to Rs. 12.73 cr.
This company earlier tried to mobilize funds in the month of September 2017 at a price of Rs. 35 per share, but withdrew its plan at that time. Issue that opened on 04.09.17 stood withdrawn on 12.09.17. At that time, my assessment was “Avoid”.
On performance front, PGL posted turnover/net profits of Rs. 838.26 cr. /Rs. 1.38 cr. (FY14), Rs. 250.02 cr. / Rs. 1.58 cr. (FY15), Rs. 244.92 cr. / Rs. 1.78 cr. (FY16) and Rs. 237.58 cr. / Rs. 1.69 cr. (FY17). For first half of current fiscal, it has earned net profit of Rs.1.31 cr. on a turnover of Rs. 110.48 crore which appears to be a window dressing before IPO. For last three fiscals, it has posted an average EPS of Rs.1.92 and an average RoNW of 11.96%. Issue is priced at a P/BV of 1.98 on the basis of its NAV of Rs.18.69 as on 30.09.17 and at a P/BV of 1.62 on the basis of post issue NAV of Rs. 22.85. It has shown declining trends in top line and marginal increase in bottom lines. If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 18. First half net profit is a bit surprising one. It has shown DP Abhushan, Vaibhav Global and Renaissance as its peers that are trading at a P/E of around 31 , 59 and 18 respectively. (as on 20.03.18) and industry average P/E is around 39.
On merchant banker’s front, this is 7th mandate from its stable and out of last 6 listings, 4 closed below the offer price and two with a marginal premium below 1% on the day of listing (as per offer documents).
This Company tried for its maiden IPO in September 2017, but was withdrawn. Its financial performance is not remarkable one. Prevalent dull sentiment for the sector following recent scam is also a concern. Hence cash surplus risk savvy investors may consider investment for long term.
Review By Dilip Davda on March 21, 2018
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 Penta Gold Ltd. offers an early investment opportunity in Penta Gold Ltd.. A stock market investor can buy Penta Gold IPO shares by applying in IPO before Penta Gold Ltd. shares get listed at the stock exchanges. An investor could invest in Penta Gold IPO for short term listing gain or a long term.
Read the Penta Gold IPO recommendations by the leading analyst and leading stock brokers.
Penta Gold IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Penta Gold IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts mentioned in the above answer to "How is Penta Gold IPO?"
Our recommendation for Penta Gold IPO is to subscribe for long term.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Penta Gold IPO.
The Penta Gold IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit Penta Gold IPO allotment status to check.
