Rajputana Bio NSE SME IPO review (May apply)

•    The company is engaged in manufacturing and supplying of bio-fuels and its by-products.
•    The company marked quantum jump in its top and bottom lines from FY24 onwards.
•    Based on its FY25 annualized super earnings, the issue appears lucratively priced, while based on FY24 earnings, it is fully priced.
•    Well-informed investors may park moderate fund for medium to long term.

ABOUT COMPANY:
Rajputana Biodiesel Ltd. (RBL) is engaged in the Business of Manufacturing and supplying of bio-fuels and its by-products namely glycerine and fatty acids. It intends to add value to its by-products and explore the export potential of bio-diesel.

RBL's manufacturing unit is operational at G24 RIICO Industrial Area, Phulera, Rajasthan 303338 spread over 4,000 Square Meters. It has an approved production capacity of 30 kilo liters per day (klpd) and an installed production capacity of 24 kilo litre per day (klpd). On the date of this Red Herring Prospectus, its products cover majorly biodiesel, glycerine and fatty acid. The Company has full flexibility in manufacturing facility to handle the multiple feed stocks as per market requirements.

As of July 31, 2024, it had 30 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 1900000 equity shares of Rs. 10 each to mobilize Rs. 24.70 cr. (at the upper cap). The company has announced a price band of Rs. 123* - Rs. 130 per share. The issue opens for subscription on November 26, 2024, and will close on November 28, 2024. The minimum number of shares to be applied is for 1000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 27.01% of the post-IPO paid-up capital of the company. (Despite a definitive size of the IPO, relevant page of RHP is missing the dilution percentage info). From the net proceeds of the IPO, the company will utilize Rs. 4.20 cr. for loans to its subsidiary Nirvaanraj Energy Pvt. Ltd. for its expansion plans, Rs. 12.20 cr. for working capital, and the rest for general corporate purposes.  (* in a surprised move, the company gave addendum cum corrigendum ad for its price band indicating reduction in the floor price from Rs. 125 to Rs. 123. Does this mean that the allotment will take place at the lower price end???)

The IPO is solely lead managed by GYR Capital Advisors Pvt. Ltd. and Maashitla Securities Pvt. Ltd. is the registrar to the issue. Giriraj Stock Broking Pvt. Ltd. is the Market Maker for the company. GYR Capital Advisors Pvt. Ltd. is the syndicate member for the issue.

Having issued initial equity shares at par value, the company issued further equity shares in the price range of Rs. 15 - Rs. 147 per share between October 2018, and September 2023. It has also issued bonus shares in the ratio of 14 for 1 in March 2023. The average cost of acquisition of shares by the promoters is Rs. 8.61, Rs. 9.02, Rs. 9.08, and Rs. 9.17 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 5.13 cr. will stand enhanced to Rs. 7.03 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 91.44 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total income/net profit of Rs. 17.46 cr. / Rs. 0.20 cr. (FY22), Rs. 23.54 cr. / Rs. 1.69 cr. (FY23), and Rs. 53.68 cr. / Rs. 4.50 cr. (FY24). For 4M of FY25 ended on July 31, 2024, it earned a net profit of Rs. 3.10 cr. on a total income of Rs. 27.79 cr. The company posted bumper growth in its top and bottom lines from FY24 onwards. The financial data pages of RHP blurred and are not readable properly).

For the last three fiscals, the company has reported an average EPS of Rs. 6.76 and an average RoNW of 27.00%. The issue is priced at a P/BV of 4.24 based on its NAV of Rs. 30.66 as of July 31, 2024, and at P/BV of 2.26 based on its post-IPO NAV of Rs. 57.49 per share (at the upper cap).

If we attribute FY25 annualized super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 9.81, and based on FY24 earnings, the P/E stands at 20.31. The issue appears fully priced. Its borrowings of Rs. 19.89 cr. as of July 31, 2024, raises concern.

For the reported periods, the company has posted PAT margins of 1.17 % (FY22), 7.21 % (FY23), 8.46% (FY24), 9.71% (4M-FY25), and RoCE margins of 11.34%, 22.01%, 22.19%, 11.00% respectively for the referred periods.

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

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown Kotyark Ind., as its listed peers. It is trading at a P/E of 34.0 (as of November 19, 2024). However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKER'S TRACK RECORD:
This is the 33rd mandate from GYR Capital in the last four fiscals. Out of last 10 listings, all listed with premiums ranging from 14.07% to 305.44% on the listing date.