Sintercom India NSE SME IPO Review (May apply)

Sintercom India Ltd. (SIL) is an ISO/TS 16949:2009 certified company by DQS Holding GmbH for manufacture of sintered metal products, machining and assembly of metal components and is currently engaged in the business of manufacturing sintered metal automotive components, transmissions systems, body chassis and exhaust applications using sintering manufacturing process. SIL's products are mainly used in commercial and passenger vehicles in which India is having usage of around 2.5Kg per vehicle against 12 Kg by European countries and 17 Kg by US. India has seen major growth in passenger and commercial vehicles in past few years, but its lower capacity engine usages have curtailed growth of sintered products. However, despite such a scenario, SIL has succeeded in adding 1.5 Kg of sintered products after mammoth task of development of tailor made products and its approval by OEMs. These process of introducing sintered products and its acceptance on commercial basis takes around 2 to 2.5 years and thus SIL's efforts in last four years have started bearing fruits. Currently SIL is the single major source for higher strength sintered product supplier to Indian automotive segment OEMs. Its customer list includes Maruti Suzuki, Mahindra & Mahindra, Bajaj Auto, Fiat, Tata, Bharat Benz, Hyundai and many more. In fact SIL will be instrumental in smooth transition to Euro –VI version of vehicles by 2020 with its sintered products that helps OEMs in bringing out more fuel efficient models.

To part finance its expansion plans, part repayment of debts, working capital and general corpus fund needs, SIL is coming out with a maiden IPO of 6546000 equity shares of Rs. 10 each via book building process with a price band of Rs. 41.24 crore to Rs. 42.55 crore based on lower and upper price bands. Issue opens for subscription on 05.02.18 and will close on 07.02.18. Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. It has reserved 50000 shares for its eligible employees.Post allotment, shares will be listed on NSE SME Emerge. Issue consists of fresh equity issue of 3016000 shares and 3530000 shares by way of Offer for Sale by existing shareholders. Issue constitutes 36% of post issue paid up equity capital of the company. Issue is solely lead managed by Pantomath Capital Advisors Pvt. Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue. Having raised initial equity at par, SIL raised further equity in the price range of Rs. 16 to Rs. 70 per share between February 2008 and January 2018. In fact, it did pre-IPO placement at Rs. 70 per share to veteran investors. Miba Sinter Holdings GmbH is currently holding 26% stake that will get diluted to 20% post issue. Post issue its current paid up equity capital of Rs. 21.19 crore will stand enhanced to Rs. 24.21 crore.

On performance front, SIL has posted turnover/net profits of Rs. 46.25 cr. / Rs. 0.13 cr. (FY14), Rs. 49.44 cr. / Rs. 0.09 cr. (FY15), Rs. 63.34 cr. / Rs. 0.69 cr. (FY16) and Rs. 66.01 cr. / Rs. 1.63 cr. (FY17). For FY 14 and 15 it suffered a setback due to shift in product variants by Maruti due to Government policy and has shown write-offs under exceptional items. For first half of current fiscal, it has reported net profit of Rs. 2.89 cr. on a turnover of Rs. 36.26 cr. Thus last 18 months working shows ripping benefits of its efforts in sintered product introduction. For last three fiscals it has posted an average EPS of Rs. 0.55 and an average RoNW of 2.69% on an equity base of Rs. 19.19 crore. Issue is priced at a P/BV of 2.92 on the basis of its NAV of Rs. 22.27 as on 30.09.17. If we annualize latest earnings and attribute it on fully diluted post issue equity then asking price is at a P/E of 27 plus. Thus is appears as a fully priced offer. SIL is expected to generate first mover fancy post listing. As per offer documents it has no listed peers to compare with. However, Sundaram Fastners (listed) and GKN (unlisted) are the competitors, but they are in lower strength sinter products, whereas SIL is concentrating on higher strength sinter products that have bright prospects going forward.

On merchant banker's front, this is the 60th mandate from its stable in last three fiscals. Out of last 10 listings, 1 opened around par and the rest with premiums ranging from 1% to 130% on the day of listing. 130% rewards are from the only main board IPO of this merchant banker i.e. Astron Paper.

From L to R : Mr Nikhil Chavan - Head Engineering and Marketing, Mr. Jignesh Raval - MD/CEO and Mr.Pankaj Bhatawadekar - CFO of SIL.