Sacheerome NSE SME IPO review (May apply)

•    The company is engaged in the business of manufacturing and marketing fragrance and flavours.
•    It marked steady growth in its top and bottom lines, but boosted profits raise eyebrows and concern over its sustainability going forward.
•    Based on its super earnings for the last two fiscals, the issue appears aggressively priced.
•    The company is operating in a highly competitive and fragmented segment.
•    Well-informed/cash surplus investors may park moderate funds for medium term.

ABOUT COMPANY:
Sacheerome Ltd. (SL) is a creative house, designing & manufacturing fragrance and flavours. It was founded in the year 1992. The Company was originally incorporated as “Sachee Fragrances Limited” under the provisions of Companies Act, 1956, the name of the company changed from “Sachee Fragrances Limited” to “Sachee Cosmetics Limited”. Later the name of the company changed from “Sachee Cosmetics Limited to Sachee Aromatics Limited”. the company has converted from “Sachee Aromatics Limited” to “Sachee Aromatics Private Limited”, and further to “Sacheerome Private Limited” and finally to “Sacheerome Limited”. Thus, perhaps it has become expert in rechristening. 

Sacheerome is in business of creation & manufacturing of Fragrance and Flavours, which are one of the most important factors in determining customer buying & preferences, and are thus viewed as vital components in any FMCG product's market standing and repurchase. The Fragrances & Flavours make a product distinct, preferred and enhance the entire factory as well sensory experience which a product promises to deliver. Its consumer insight and market research team conduct detailed analysis, enabling the company to deliver tailored solutions that perfectly align with consumer preferences, latest market trends and the customer’s requirements. It is into B2B segment in food and non-food FMCG, catering to leading companies in India & many other parts of the world, in various categories.

Fragrances manufactured by it are used in the Personal Care & Wash, Body Care, Hair Care & Wash, Fabric Care, Home Care, Baby Care, Fine fragrance, Air care, Pet Care, Men’s Grooming, Hygiene & Wellness and various other industries. Flavours manufactured by it are used in Beverage, Bakery, Confectionery, Dairy Products, Health & Nutrition, Oral care, Meat Products, Dry Flavours, Seasonings and others. It is Sacheerome’s endeavour to continue to do research and innovation to deliver more solutions. Its products adhere to the global standards such as the International Fragrance Association (IFRA), European Commission (EU), Food Safety and Standards Authority of India (FSSAI), and Flavour Extract Manufacturers Association (FEMA as per the requirements of the customers). SL is member of Chemexcil and Fragrances & Flavours Association of India (FAFAI). 

The company has domestic revenue of around 94% on an average and the rest by way of exports.Top 10 customers contribute at an yearly average of around 58% of its total turnover. As of March 31, 2025, it had 158 employees on its payroll and additional 23 contract workers.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 6040800 equity shares of Rs. 10 each to mobilize Rs. 61.62 cr. at the upper cap. It has announced a price band of Rs. 96 – Rs. 102 per share. The issue opens for subscription on June 09, 2025, and will close on June 11, 2025. The minimum number of shares to be applied is for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 27% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 56.50 cr. capex on new manufacturing unit in Buddha Nagar, UP., and the rest for general corporate purposes. 

The IPO is solely lead managed by GYR Capital Advisors Pvt. Ltd., and MUFG Intime India Pvt. Ltd., is the registrar to the issue. Giriraj Stock Broking Pvt. Ltd., is the market maker. GYR Capital is also a syndicate member, and Intellect Stock Broking Ltd. is a sub-syndicate member.

The company has issued initial equity shares at par value, and issued further equity capital at a fixed price of Rs. 100 per share in February 2011. It has also issued bonus shares in the ratio of 43 for 10 in June 2010, and 3 for 1, in March 2024. The average cost of acquisition of shares by the promoters is Rs. NIL, and Rs. 0.47 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 16.33 cr. will stand enhanced to Rs. 22.37 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 228.20 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 70.93 cr. / Rs. 5.99 cr. (FY23), Rs. 86.40 cr. / Rs. 10.67 cr. (FY24), Rs. 108.13 cr. / Rs. 15.98 cr. (FY25). 

The sudden boost in its bottom lines from FY24 onwards raise eyebrows and concern over its sustainability going forward.

For the last three fiscals, the company has reported an average EPS of Rs. 7.69 and an average RoNW of 23.45%. The issue is priced at a P/BV of 2.69 based on its NAV of Rs. 37.95 as of March 31, 2025, but the offer documents are missing its post-IPO NAV data.

If we attribute FY25 super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 14.29. Based on FY24 earnings, the P/E stands at 21.38. The issue relatively appears aggressively priced.

For the reported periods, the company has posted PAT margins of 8.50% (FY23), 12.54% (FY24), 14.86%, (FY25), and RoCE of 0.25 times, 0.31 times and 0.33 times, respectively for the referred periods.  RoCE margins in number of times instead of percentage basis is a surprise. PAT margins posted by this company is a wonder as no company in the said segment is posting such hefty margins.

DIVIDEND POLICY:
The company has not declared any dividends for any financial year. 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 S H Kelkar Ltd., as their listed peer. It is trading at a P/E of 31.4 (as of June 06, 2025). However, they are not truly comparable on an apple-to-apple basis. This peer comparison appears to be an eyewash.

MERCHANT BANKER’S TRACK RECORD:
This is the 42nd mandate from GYR Capital in the last five fiscals including the ongoing one.  From the last 10 listings, 1 listed at par and the rest with a premium ranging from 4.18% to 90% on the listing date.