Sameera Agro NSE SME IPO review (Avoid)

•    The company is in infra and agro segments with major thrust on agro.
•    It marks boost in its top and bottom lines from FY23 onwards.
•    Based on FY24 annualized super earnings, the issue appears fully priced. 
•    The company is operating in a highly competitive and fragmented segments.
•    There is no harm in skipping this High Risk/Low Return bet. 

ABOUT COMPANY:
Sameera Agro and Infra Ltd. (SAIL) is a multi-faceted infrastructure development and construction of Residential, Commercial spaces, Apartments, Townships, Multi storied complexes, Gated communities, Landscapes, Bridges, Flyovers, Subways, Alleys, Industrial parks, Laying of Water pipelines, Gas pipelines and other related works with the primary objective of delivering quality and value to its clients. Over the years, it has fortified commitment by delivering massive and technically driven projects across India on tough terrains and in a tough industry environment. It has a breadth of experience encompassing the major sectors of the infrastructure industry.

The Company has developed number of residential layouts in and around Hyderabad and Secunderabad, the then undivided State of Andhra Pradesh. The Company, thus grown by leaps and bounds as a real estate developer with a diversified portfolio of real estate projects, the Company has undertaken customized real estate projects, infrastructure projects, marketing, and commercialization of developed land parcels.

Further, as a part of the other business activity from the year 2021, the Company has expanded its wings to processing, drying, sale, purchase, marketing, and distribution of agricultural commodities of pulses, cereals, grains, such as urad dal, moong dal, toor dal etc., - peeled and unpeeled, mung dal, black grans, green gram, mung beans, red lentils, yellow dal, split yellow peas etc. The company has established over a period of 2 years a strong customer network, suppliers' network and warehouses for storage of goods.

The Company has got manufacturing and processing units on lease basis near Hyderabad which is accessible for all the three states viz., Telangana, Karnataka, and Maharashtra. The Company is also in the process of acquiring processing mills on lease basis at Guntur and Rajahmundry in Andhra Pradesh. During the past three financial years, the Company operates and total revenues accounts for 37.17% in Infrastructure industry and 62.83% in Agriculture industry and 100% revenues are accounted from Agriculture industry for the financial years 2021-22 and 2022-23. As of September 30, 2023, it had 48 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden IPO of 3480000 equity shares of Rs. 10 each at a fixed price of Rs. 180 per share to mobilize Rs. 62.64 cr. The issue opens for subscription on December 21 2023, and will close on December 27, 2023. The minimum application to be made is for 800 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 29.22% of the post-IPO paid-up equity capital of the company. The company is spending Rs. 1.50 cr. for this IPO process, and from the net proceeds, it will utilize Rs. 6.62 cr. for construction of ongoing project, Rs. 49.69 cr. for construction of new multiplex, Rs. 3.83 cr. for working capital, and Rs. 1.00 cr. for general corporate purposes. 

The issue is solely lead managed by First Overseas Capital Ltd. and KFin Technologies Ltd. is the registrar of the issue. SVCM Securities Pvt. Ltd. is the market maker for the company. 

The company has issued entire equity shares at par value so far. It has also issued bonus shares in the ratio of 1 for 1 in February 2023. The average cost of acquisition of shares by the promoters is Rs. 4.87, and Rs. 5.00 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 8.43 cr. will stand enhanced to Rs. 11.91 cr. Based on the upper cap of the IPO price band, the company is looking for a market cap of Rs. 214.38 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 80.10 cr. / Rs. 1.22 cr. (FY21), Rs. 105.34 cr. / Rs. 2.74 cr. (FY22), and Rs. 138.82 cr. / Rs. 10.04 cr. (FY23). For H1 of FY24 ended on September 30, 2023, it earned a net profit of Rs. 6.92 cr. on a total income of Rs. 94.37 cr.

For the last three fiscals, the company reported an average EPS of Rs. 8.61 and an average RoNW of 40.40%. The issue is priced at a P/BV of 5.90 based on its NAV of Rs. 30.49 as of September 30, 2023, and at a P/BV of ?? based on its post-IPO NAV of Rs. ?? per share at the upper cap. (In the offer document, there appears to be a typo error as the NAV is shown as Rs. 506.73 (see page no. 75)

If we attribute super annualized earnings of FY24 on post-IPO fully diluted paid-up equity capital of the company, then the asking price is at a P/E of 15.49. The issue appears fully priced based FY24 earnings. 

For the reported periods, the company has posted PAT margins of 1.53% (FY21), 2.60% (FY22), 7.23% (FY23), 7.34% (H1-FY24), and RoCE margins of 28.12% 33.22%, 64.17% and 33.39% for the said periods respectively.  

DIVIDEND POLICY:
The company has not paid any dividends since incorporation. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown JK Agri as their listed peer. It is trading at a P/E of 00 (as of December 19, 2023). However, they are not comparable on an apple-to-apple basis. 

MERCHANT BANKER'S TRACK RECORD:
This is the 24th mandate from First Overseas in the last three fiscals. Out of the last 10 listings, 1 opened at discount, 1 at par and the rest with premiums ranging from 0.04% to 43.53% on the date of listing.