Sheel Biotech NSE SME IPO review

•    The company is engaged in the business of growing, developing, processing and supplying a wide range of plants for field crops, fruits, vegetables, and ornamental plants.
•    The company reported growth in its top and bottom lines for the reported periods.
•    It is operating in a highly fragmented segment.
•    Based on its recent financial data, the issue appears fully priced.
•    Well-informed investors may park moderate funds for medium term.

ABOUT COMPANY:
Sheel Biotech Ltd. (SBL) is engaged in the business of growing, developing, processing, and supplying a wide range of plants for field crops, fruits, vegetables, and ornamental plants through tissue culture and organic farming. The company manufactures and maintains greenhouses, offer services to farmers and provide training through Farmer Producer Organizations (FPOs). Additionally, it delivers green landscaping services to both government and private sectors. 

It is an ISO 9001:2015, ISO 14001:2015 & ISO 45001:2018 certified company and is managed by industry experts and professionals with knowledge in the field of Biotechnology, Agriculture, Floriculture, Horticulture, Tissue Culture and Green Houses. The company also has a Research and Development lab with a capacity of production of 10 million planting materials which is duly recognized by the Department of Biotechnology (DBT), Government of India.

The company strives to be a provider of sustainable agricultural practices, biotechnology projects, organic farming, farmer-producer organizations, and Agro-skill development. The company mulls revolutionizing the farming landscape through innovation, quality, and commitment to environmental stewardship. SBL envision a future where advanced agricultural practices ensure food security, improve farmer’s livelihoods, and protect the planet. By harnessing its advanced technology and fostering collaboration, it aims to create a thriving, sustainable ecosystem for current and future generations. As of September 12, 2025, it had 160 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 5400000 equity shares to mobilize Rs. 34.02 cr. at the upper cap. It has announced a price band of Rs. 59 – Rs. 63 per share of Rs. 10 each. The IPO opens for subscription on September 30, 2025, and will close on October 03, 2025. The minimum application to be made is for 4000 shares and in multiple of 2000 shares thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.53% of post-IPO paid-up equity capital of the company. From the net proceeds of the issue, the company will utilize Rs. 9.12 cr. for capex requirement, Rs. 15.88 cr. for working capital, and the rest for general corporate purposes.

The IPO is solely lead managed by Narnolia Financial Services Ltd., while Skyline Financial Services Pvt. Ltd., is the registrar to the issue. Mansi Share & Stock Broking Pvt. Ltd. Ltd., is the market maker. Nexgen Financial Solutions Pvt. Ltd. is a syndicate member. The issue is underwritten to the tune of 15.01%by Narnolia Financial, and 84.99% by Nexgen Financial.

After issuing/converting initial equity shares at par value, the company issued further equity shares at a fixed price of Rs. 45 per share in September 2024. It has also issued bonus shares in the ratio of 2.5 for 1 in August 2024. The average cost of acquisition of shares by the promoters is Rs. 0.56, Rs, 2.00, and Rs. 2.86 per share.

Post-IPO, company’s current paid-up equity capital of Rs. 14.95 cr. will stand enhanced to Rs. 20.35 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 128.22 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted total Income/Net Profit of Rs. 80.19 cr. / Rs. 5.08 cr. (FY23), Rs. 92.55 cr. / Rs. 10.47 cr. (FY24), and Rs. 102.27 cr. / Rs. 10.64 cr. (FY25). The company marked growth in its top and bottom lines for the reported period. However, boosted bottom lines from FY24 onwards raise surprises and concern over its sustainability.

For the last three fiscals, the company has reported an average EPS of Rs. 6.60, and an average RoNW of 13.29%. The issue is priced at a P/BV of 1.11 based on its NAV of Rs. 56.84 as of March 31, 2025, and at a P/BV of 1.09 based on its post-IPO NAV of Rs. 57.92 per share.

If we attribute its FY25 super earnings on post-IPO expanded equity base, then the asking price is at a P/E of 12.05, and based on its FY24 earnings, the P/E stands at 12.23. Thus, based on its recent financial data, the issue appears aggressively priced.

The company has posted PAT margins of 6.34% (FY23), 11.35% (FY24), 10.45% (FY25), and RoCE Margins of 10.75%, 16.48%, 16.34%, respectively for the referred periods. NET PROFIT MARGINS DATA DIFFERES ON THE SAME NO. 138 OF THE OFFER DOCUMENT.

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

COMPARISON WITH LISTED PEERS:
As per offer document, the company has shown Jain Irrigation, Vrundavan Plantation, as its listed peers. They are currently trading at a P/E of around 111 and 15.8 (as of September 29, 2025).  However, they are not truly comparable on an apple-to-apple basis. This comparison appears to be an eyewash.

MERCHANT BANKER’S TRACK RECORDS:
This is the 24th mandate from Narnolia Financial in the last three fiscals (including the ongoing one). Out of the last 10 listings, 1 opened at discount, and the rest with premium ranging from 2.60% to 90% on the date of listing.