Signoria Creation NSE SME IPO review (Apply)

•    SCL specialized in women garments specifically Kurtis and related garments.
•    The company sells its products under "Signoria" brand.
•    The company marked growth in its financial performance from FY21 to FY23.
•    Though on half-yearly basis, its financial performance appears declined, its second half always remains better due to seasonality aspect of the business.
•    Well-informed investors may park funds for the medium to long term rewards.

ABOUT COMPANY:
Signoria Creation Ltd. (SCL) is engaged in manufacturing and marketing of women apparels like Kurtis, pants, tops, Co-Ord Sets, dupattas and Gowns. It is popularly known and identified in apparel market by brand name "Signoria". Its brand is known for its Kurtis with traditional designs having wide range of colour, patterns and sizes. The Company cater to those who are looking for clothing that is comfortable, stylish, and trendy. 

The Company expanded its product portfolio by adding Co-Ord Set for women during the first quarter ended June 30, 2023. The company's primary goal is to manufacture women's branded clothes under the Signoria brand. The company has placed a strong emphasis on using high-quality materials and adhering to strict quality control guidelines, which guarantees that the clothing is produced to the highest standards of consistency and quality, winning clients' faith and confidence. Signoria is committed to creating only the best designs going forward. The company places a strong emphasis on involving clients in the manufacturing process, and it goes above and beyond to create samples and patterns to guarantee that clients' ideas are accurately reflected in the final goods. As of February 15, 2024, it had 153 employees (including 45 regular and the rest on contracts).

According to management, their business has cyclical trends and as per historical data so far, their two third revenues with matching profits emerges in the second half that has winter season with many festivals around. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 1428000 equity shares of Rs. 10 each to mobilize Rs. 9.28 cr. at the upper cap. The company has announced a price band of Rs. 61 - Rs. 65 per share. The issue opens for subscription on March 12, 2024, and will close on March 14, 2024. The minimum application to be made is for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 30.01% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 6.28 cr. for working capital, and the rest for general corporate purposes. 

The company has reserved 40000 shares for its eligible employees, 72000 for market maker and from the rest, it has allocated not more than 50% for QIBs, not less than 35% for Retail and not less than 15% for HNI investors. 

The issue is solely lead managed by Holani Consultants Pvt. Ltd., and Bigshare Services Pvt. Ltd. is the registrar of the issue. Holani Consultants Pvt. Ltd. is also the market maker for the company. 

Having issued initial equity capital at par, the company issued further equity capital at a fixed price of Rs. 33 per share in August 2022. It has also issued bonus shares in the ratio of 2 for 1 in October 2023. The average cost of acquisition of equity shares by the promoters is Rs. 0.17 Rs. 20.78 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 3.33 cr. will stand enhanced to Rs. 4.76 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 30.93 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 5.89 cr. / Rs. 0.33 cr. (FY21), Rs. 11.82 cr. / Rs. 0.68 cr. (FY22), and Rs. 19.16 cr. / Rs. 2.31 cr. (FY23). For H1 of FY24 ended on September 30, 2023, it earned a net profit of Rs. 0.65 cr. on a total income of Rs. 6.53 cr. Around two-third yearly revenues with commensurate profits happens on the second half, claims the management. 

For the last three fiscals, it has reported an average EPS of Rs. 19.44, and an average RONW of 41.25%. The issue is priced at a P/BV of 1.11 based on its NAV of Rs. 58.36 as of September 30, 2023, and at a P/BV of 2.05 based on its post-IPO NAV of Rs. 31.77 per share (at the upper cap).

If we attribute annualized FY24 earnings to its post-IPO fully diluted paid-p capital, then the asking price is at a P/E of 23.99. Thus the issue appears aggressively priced. Based on FY23 earnings, the P/E stands at 13.40

For the reported periods, the company has posted PAT margins of 5.57% (FY21), 5.72% (FY22), 12.07% (FY23), 9.88% (H1-FY24), and RoCE margins of 23.71%, 29.65%, 24.58%, 7.38% respectively for the referred periods. 

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 performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Nandani Creations as their listed peers. It is trading at a P/E of NA (as of March 06, 2024). However, they are not comparable on an apple-to-apple basis.

MERCHANT BANKER'S TRACK RECORD:
This is the 9th mandate from Holani Consultants in the last three fiscals, out of the last 8 listings, 1 opened at discount, and the rest with premiums ranging from 4.94% to 266.20% (Purv Flexi), on the listing date.