Shree Refrigeration BSE SME IPO review (Apply)

•    The company enjoys niche place in refrigeration and air-conditioning with specialized tailor-made services. 
•    It has long term contracts with defence sector of GoI for war ship/submarine/and other critical areas servicing.
•    The company posted growth in its top and bottom lines for the reported periods.
•    Based on recent financial data, the issue appears reasonably priced.
•    Investors may park funds for medium to long term.

ABOUT COMPANY:
Shree Refrigerations Ltd. (SRL) is engaged in the business of manufacturing Chillers, refrigeration and air conditioning appliances and other parts of Heating, Ventilation, Air Conditioning (HVAC) Industry, offering array of advanced systems and equipment to industries majorly in domestic market. Its collection of products serves multiple industries including Automotive, Marine, Print Media, Chemical, Pharma and General engineering sectors. It is also actively involved in the manufacturing of marine chillers, having approved supplier registrations from various professional directorates of Indian Navy (Directorate of Electrical Engineering and backed by Directorate of Quality Assurance – Warship Projects).

In the automotive industry, SRL’s products help to maintaining optimal temperature control in various systems. In the marine sector, it ensures crew comfort and operational efficiency on ships and marines and also support maintaining the electronic warfare systems to be at optimal operating temperature. Its systems also play a vital role in maintaining environmental conditions in the print media, chemical, and pharmaceutical industries, where temperature regulation is crucial for product quality, safety.

SRL’s product range includes Chillers, Test Equipment, Marine HVAC & R Systems, and Printing Chillers, among others. The company also provides value-added fabrication services, offering customized solutions to the engineering industry. Its team works closely with clients to develop engineered components that meet the quality standards. With its in-house design capabilities and technical collaborations with entities, the company leverages its knowledge in refrigeration and HVAC systems to deliver state-of-the-art solutions. 

It prioritizes the implementation and maintenance of a robust Quality Management System, ensuring its products adhere to the quality and reliability standards. Over the years, the company has received various registrations and recognitions that support business and enable it to secure government orders for the Indian Navy. As of May 31, 2025, it had 129 employees on its payroll and additional 165 contract labours in various departments.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden IPO of 9386000 equity shares to mobilize Rs. 117.32 cr. (at the upper cap). The issue consists of 7561000 fresh equity shares worth Rs. 94.51 cr. (at the upper cap) and 1825000 equity share worth Rs. 22.81 cr. (at the upper cap).by way of offer for sale (OFS). It has announced a price band of Rs. 119 – Rs. 125 per share of Rs. 2 each. The IPO opened for subscription on July 25, 2025, and will close on July 29, 2025. The minimum application to be made is for 2000 shares and in multiple of 1000 shares thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.34% of post-IPO paid-up equity capital of the company. From the net proceeds of the issue, the company will utilize Rs. 70.00 cr. for working capital, and the rest for general corporate purposes.

The IPO is solely lead managed by Narnolia Financial Services Ltd., while MUFG Intime India Pvt. Ltd. is the registrar to the issue. Mansi Share & Stock Broking Pvt. Ltd. is the market maker. Prabhat Financial Services Ltd. has underwritten the issue to the tune of 84.99% and Narnolia Financial has underwritten to the tune of 15.01%.

After issuing initial equity shares at par, the company issued further equity shares in the price range of Rs. 3.90 – Rs. 130.00 per share (on the basis of Rs. 2 FV) between December 2020, and December 2024. It has also issued bonus shares in the ratio of 77 for 130 in March 2012. The average cost of acquisition of shares by the promoters is Rs. NA, Rs. 1.41, Rs. 4.15, and Rs. 81.22 per share.

Post-IPO, company’s current paid-up equity capital of Rs. 5.61 cr. will stand enhanced to Rs. 7.13 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 445.38 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total income/net profit of Rs. 50.91 cr. / Rs. 2.57 cr. (FY23), Rs. 81.19 cr. / Rs. 11.53 cr. (FY24), Rs. 99.10 cr. / Rs. 13.55 cr. (FY25). The company is going great guns with good margins and specialized tailor-made equipment supply.

For the last three fiscals, the company has reported an average EPS of Rs. 4.69, and an average RoNW of 19.69%. The issue is priced at a P/BV of 3.06 based on its NAV of Rs. 40.88 as of March 31, 2025, and at a P/BV of 2.13 based on its post-IPO NAV of Rs. 58.73 per share (at upper cap).

If we attribute its FY25 super earnings on post-IPO expanded equity base, then the asking price is at a P/E of 32.89, and based on its FY24 earnings, the P/E stands at 38.58. Thus, based on its recent financial data, the issue appears reasonably priced.

The company has posted PAT margins of 5.09% (FY23), 14.36% (FY24), 13.72% (FY25), and RoCE margins of 19.61%, 34.15%, 23.22%. respectively for the referred periods.

DIVIDEND POLICY:
The company paid a dividend of 0.01% for FY23 and FY24. It has adopted a dividend policy based on its financial performance and future prospects.

COMPARISON WITH LISTED PEERS:
As per offer document, the company has shown Johnson Controls, as its listed peer. It is trading at a P/E of around 117.0 (as of July 25, 2025). However, they are not truly comparable on an apple-to-apple basis.

MERCHANT BANKER’S TRACK RECORDS:
This is the 20th mandate from Narnolia Financial in the last three fiscals (including the ongoing one). From the last 10 listings, 3 opened at discount, and the rest with premium ranging from 2.60% to 90% on the date of listing.