Review By Dilip Davda on September 19, 2018
• Company is engaged in the business of trading of scrap.
• It follows B2B model of working.
• Its financial data shown inconsistency.
• Issue appears fully priced discounting all near term positives.
ABOUT COMPANY:
Rajnandini Metal Ltd. (RML) is in business of trading of scrap of all types of ferrous and Non ferrous Metals such as Copper Wires, ingot scrap, and other related items used in various electrical and industrial applications. It works as a crucial business interface, networking between manufacturers / processors / yards and consumers / traders across the country. The company operates as an important intermediary in the Metals Supply Chain whereby it purchases materials such as Annealed/Un-Annealed Copper Wires, Copper Wires, Brass Scrap, Aluminium ingot, Zinc ingot etc. from various suppliers and supply the same to customers in the Metal Business. Company’s business model is based on B2B model wherein the Company sells the scrap to the business enterprises who further transform the scrap in to finished product as per their requirements.
ISSUE DETAILS/CAPITAL HISTORY:
To part finance its working capital, general corpus fund needs, RML is coming out with a maiden IPO of 1644000 equity shares of Rs. 10 each at a fixed price of Rs. 26 per share. The company mulls mobilization of Rs. 4.27 cr. with this issue. Issue opens for subscription on 24.09.18 and will close on 27.09.18. Minimum application is to be made for 4000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Issue constitutes 26.76% of the post issue paid up capital of the company. Issue is solely lead managed by Corporate Capital Ventures Pvt. Ltd. while Bigshare Services Pvt. Ltd. is the registrar to the issue. Its entire equity is issued at par. Average cost of acquisition of shares by the promoters is Rs. 10 per share. Post issue its current paid up equity capital of Rs. 4.50 cr. will stand enhanced to Rs. 6.14 cr.
FINANCIAL PERFORMANCE:
On performance front, for last four fiscals, RML has posted turnover/net profits of Rs. 109.84 cr. / Rs. 0.55 cr. (FY15), Rs. 136.55 cr. / Rs. 0.32 cr. (FY16), Rs. 127.31 cr. / Rs. 0.55 cr. (FY17) and Rs. 141.16 cr. / Rs. 0.94 cr. (FY18). It has inconsistency in top and bottom lines. It suffered a setback in turnover for FAY17 but posted higher bottom line. For last three fiscals, it has posted an average EPS of Rs. 1.57 and an average RoNW of 9.27%. Issue is priced at a P/BV of 1.46 on the basis of its NAV of Rs. 17.84 and at a P/BV of 1.3 on the basis of post issue NAV of Rs. 20.02.If we consider FY18 earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 17. Thus issue is fully priced discounting near term positives.
COMPARE WITH LISTED PEERS:
As per offer documents, it has no listed peers to compare with.
MERCHANT BANKER’S TRACK RECORDS:
On merchant banker’s front, this is the 7th mandate from its stable in last two fiscals. Out of last 6 listings, 1 opened at discount, rest at a premium ranging from 0.70% to 8.75% on the day of listing.
Fully priced issue with inconsistent track record makes it a risky bet. Cash surplus, risk savvy investors may consider investment at their own risk.
Review By Dilip Davda on September 19, 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 Rajnandini Metal Ltd. offers an early investment opportunity in Rajnandini Metal Ltd.. A stock market investor can buy Rajnandini Metal IPO shares by applying in IPO before Rajnandini Metal Ltd. shares get listed at the stock exchanges. An investor could invest in Rajnandini Metal IPO for short term listing gain or a long term.
Read the Rajnandini Metal IPO recommendations by the leading analyst and leading stock brokers.
Rajnandini Metal IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Rajnandini Metal IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts mentioned in the above answer to "How is Rajnandini Metal IPO?"
Our recommendation for Rajnandini Metal 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 Rajnandini Metal IPO.
The Rajnandini Metal IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit Rajnandini Metal IPO allotment status to check.
