Rajnish Wellness BSE SME IPO review (May apply)

Rajnish Wellness Ltd. (RWL) is currently engaged in the business of selling various products in the categories ranging from consumer durables to ayurvedic personal care products. Company’s major focus area is sexual wellness, energy revitalization and personal care products. Changing lifestyle and awareness of health and wellness is increasing demand for sexual wellness and energy revitalization products. Current product portfolio is concentrated on ayuvedic products. Company is exploring ethical market in sexual wellness and energy revitalization category. Recently, RWL newly launched Play win spary in this category. Company has very strong hold in Maharasthra, Uttar Pardesh, Karnataka, Bihar, Odisha, Delhi, Jharkhand, Madhya Pradesh, Uttarakhand, Haryana and West Bengal.

Company runs on asset light model and owns all the brands under its name. Rajnish is sourcing its all products from dedicated manufacturers since inception. It has outsourced all its manufacturing needs to various suppliers who are expert in particular product in India which enables company to adhere to the required specifications and quality in stipulated time.

RWL’s personal care products are sold under brand name like “PlayWin Capsules” , “PlayWin Condom”, “Rajnish Lotion”, “Rajnish Plus Lotion”, “Play Win Spray”, , “PlayWin Plus Capsules”, “PlaWin Oil”, , “PlayWin F Capsule”, “Kasaav Powder”, “SudantaDantManjan”, “Mithohar Liquid”, “Mithohar Tablets”, “Madamrit Hair Shampoo”, “Madamrit Hair Oil”, “Madamrit Hair Capsule” and Pia Lo Herb’s.

To part finance its plans for branding and advertising expenses, working capital and general corpus fund needs, RWL is coming out with a maiden IPO of 1261200 equity shares of Rs. 10 each at a fixed price of Rs. 95 per share to mobilize Rs. 11.98 cr. Issue opens for subscription on 25.06.18 and will close on27.06.18. Minimum application is to be made for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue is solely lead managed by Navigant Corporate Advisors Ltd. Bigshare Services Pvt. Ltd. is the registrar to the issue. Issue constitutes 26.99% of the post issue paid up capital of the company. Having issued initial equity at par, it raised further equity at a price of Rs. 20 per share (February 2018) and has also issued bonus in the ratio of 19 for 1 (January 2018). Average cost of acquisition of shares by the promoters is Rs. 7.08 per share. Post issue, RWL’s current paid up equity capital of Rs. 3.41 cr. will stand enhanced to Rs. 4.67 cr. As on 28.02.18 its debt equity ratio is 0.75:1.

On performance front, for last two fiscals, RWL has posted turnover/net profits of Rs. 13.16 cr./ Rs. 0.32 cr. (FY16), Rs. 25.30 cr. / Rs. 0.64 cr. (FY17). For first 11 months ended on 28.02.18 of FY18 it has earned net profit of Rs. 1.62 cr. on a turnover of Rs. 24.23 cr. For last two fiscals it has posted an average EPS of Rs. 5.34 and an average RoNW of 31.09%. Issue is priced at a P/BV of 2.15 on the basis of its NAV of Rs. 44.26 as on 28.02.18 and at a P/BV of 2.58 on the basis of post issue NAV of Rs. 36.77 (??).If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 25. It has no listed peers to compare with. Issue appears fully priced.

On merchant banker’s front, this is the 14^th mandate from its stable in last three fiscals. Out of last 10 listings 3 opened at discount and 7 opened at a premium ranging from 1.25% to 20% on the day of listing.