Shanti Overseas NSE SME IPO review (Apply)

Shanti Overseas (India) Ltd (SOIL) is engaged in manufacturing of soya products which includes, soya de-oiled cakes (soya meal), soya crude oil, degummed oil and soya lecithin, and are also into primary processing and trading of agri commodities such as chickpeas, soyabeans, cracked corn, maize, yellow peas, pulses etc. Present two units of manufacturing are taken on rent by the company. SOIL is in process of setting up a processing plant in the area of Dhannad, dist. Indore, for production of edible partially defatted organic Soya Flour, textured Soy Protein, expeller pressed physical refined oil and Organic Soya Lecithin. Post completion of this unit, second unit facilities will be transferred here.

Company has been accorded with the status of 'One Star Export House' by Ministry of Commerce & Industry, Government of India and has also received ISO 22000:2005 and FSSAI License for processing activities carried at Unit II. It is also certified from Kosher and is registered with U.S. Food and Drug Administration (USFDA). SOIL has recently incorporated two wholly owned subsidiaries, namely, Biograin Protinex Private Limited and Shaan Agro Oils & Extractions Private Limited.

To part finance purchase of machinery for the proposed plant at Dhannad, investment in subsidiary and general corpus fund needs, the company is coming out with a maiden IPO of 2004000 equity share of Rs. 10 each at a fixed price of Rs. 50 per share to mobilize Rs. 10.02 crore. Issue opens for subscription on 21.07.17 and will close on 26.07.17. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Issue is solely lead managed by Hem Securities Ltd and Link Intime India Pvt Ltd is the registrar to the issue. SOIL issues equity on incorporation at a consideration of Rs. 20 per share and then issued further equity at Rs. 25 per share. It has also issued bonus shares in the ratio of 5 for 1 in March 2017 and in the ratio of 1 for 2 in May 2017. Thus sudden two bonus issues in a short span of 2 months in 2017 is surprising. Post issue, company's current paid up equity capital of Rs. 5.40 crore will stand enhanced to Rs. 7.40 crore. The issue constitutes 27.07% of the post issue paid up capital of the company.

On performance front, the company has (on standalone basis) reported turnover/net profits of Rs. 89.28 cr. / Rs. 0.33 cr. (FY13), Rs. 104.92 cr. / Rs. 0.48 cr. (FY14), Rs. 71.52 cr. / Rs. 0.70 cr. (FY15), Rs. 91.04 cr. / Rs. 1.87 cr. (FY16) and Rs. 115.88 cr. / Rs. 3.79 cr. (FY17). As per prospectus, its FY17 restated performance on consolidated basis remains same as standalone. Despite declined top line for FY15 and FY16, it reported higher net. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of 9.7 (against industry average of 39 plus) and at a P/BV of 3.14. Company's average RoNW for last three fiscal is 39.17%.

On merchant banker's front, this is the 36th mandate from its stable so far and out of last 10 listings, one IPO gave negative return, two IPOs opens just above offer price and the rest opened at a good premium to offer price.

Conclusion: Investors may consider investment for short to long term.