Review By on September 12, 2017
Sagar Diamonds Ltd (SDL) is a engaged in manufacturing and exporting of rough and polished diamonds procured from the trusted and certified suppliers and in jewelry making. The company is also involved in trading of diamond and processing by trained and qualified workers on job work basis. It's product range includes rings, chain, mangalsutra, earrings and necklaces, which are carefully handcrafted by skilled artisans. SDL has its manufacturing facility located in Sachin (S.E.Z), Gujarat having a total area of approximately 1,000 sq. ft. As on March 31, 2017, this facility had a capacity of Gold and Silver Jewellery of 35,000 gram per month. This facility for manufacturing of Diamonds Jewellery have been recognized for its quality Management System with ISO 9001:2015 vide certificate issued on July 13, 2017.
To part finance its working capital and general corpus fund needs, SDL is coming out with a maiden IPO via book building route for listing on BSE SME. The company is issuing 3381000 equity share of Rs. 10 each in a price band of Rs. 40 – Rs. 45 to mobilize Rs. 13.52 cr. to Rs. 15.21 cr. (based on lower and upper price bands). Issue opens for subscription on 14.09.17 and will close on 18.09.17. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter. Issus is solely lead managed by Gretex Corporate Services Pvt. Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Having issued initial equity at par and a bonus in the ratio of 33 shares for every 1 share held in April 2017 and thereafter, raised/converted further equity at a price of Rs. 50 per share
The issue will constitute 26.74% of the post issue paid up equity share capital of the company. Post issue, its current paid up equity capital of Rs. 9.26 crore will stand enhanced to Rs. 12.64 crore.
On performance front, SDL has posted turnover/net profits of Rs.9.99 cr. / Rs. 0.35 cr. (FY17). For the period ended on 20.06.17 it has posted net profit of Rs. 0.30 crore on a turnover of Rs. 10.45 crore that is surprising. As on the said date, its trade receivables were Rs. 20.21 crore. Considering its track record which is just for around 15 months with more than annual turnover in first uncompleted quarter, it is not feasible to annualize the latest performance. However, even if we annualize and attribute to the fully diluted equity post issue, then asking price is at a P/E of around 42 plus (based on upper price band). Last two financial periods it has shown average RoNW of 22.93% that is surprising. Thanks to further equity issue at Rs. 50 per share that has helped it to have NAV of Rs. 23.30 as on 20.06.17 and on the basis of it the issue is priced at a P/BV of 1.93. Peers are trading around 18 P/E. Thus issue is aggressively priced.
On merchant banker's front, this is the 6th mandate from its stable in last three years. Out of last 4 listings two opened at discount, 1 at par and 1 at 4% premium to offer price on the day of listing. (Last IPO of A & M Febcon, which is yet to be listed – as on 12.09.17.)
Conclusion: Considering aggressive pricing, there is no harm in giving this issue a miss.
Review By on September 12, 2017
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 Sagar Diamonds Ltd. offers an early investment opportunity in Sagar Diamonds Ltd.. A stock market investor can buy Sagar Diamonds IPO shares by applying in IPO before Sagar Diamonds Ltd. shares get listed at the stock exchanges. An investor could invest in Sagar Diamonds IPO for short term listing gain or a long term.
Read the Sagar Diamonds IPO recommendations by the leading analyst and leading stock brokers.
Sagar Diamonds IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Sagar Diamonds IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts mentioned in the above answer to "How is Sagar Diamonds IPO?"
Our recommendation for Sagar Diamonds IPO is to avoid.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Sagar Diamonds IPO.
The Sagar Diamonds IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit Sagar Diamonds IPO allotment status to check.
