Review By on September 17, 2018
• Company is having a single unit for its business.
• FY18 results raises eyebrows being superb earnings in pre-IPO year.
• Based on its average performance, issue pricing is exorbitant.
• Merchant banker has poor track record.
ABOUT COMPANY:
Sky Gold Ltd. (SGL) is engaged in the business of designing, manufacturing and marketing of Gold jewelleries since its incorporation. It mainly deals in 22 Karat gold jewellery, offering a wide variety of designs to suit preferences of the end customer. Company provides an extensive range of designs and also uses studded American diamonds and / or coloured stones in many of jewellery products. SGL’s product range includes necklaces, rings, pendants, bracelets, earrings and bangles and customized jewellery based on customer demand. Besides, various clients in Mumbai and nearby areas, it also caters to various jewellery brands. Company operate from a 2,740 sq. ft. sole manufacturing facility which is located in the heart of Mumbai city in Mulund (West) where it makes casting based jewellery using rubber dye, wax moulds and machines.
ISSUE DETAILS/CAPITAL HISTORY:
To part finance its plans for repayment of loans (from promoters), working capital and general corpus fund needs, SGL is coming out with a maiden IPO of 1420000 equity shares of Rs. 10 each with a fixed price of Rs. 180 per share. Issue opens for subscription on 18.09.18 and will close on 21.09.18. SGL mulls mobilizing Rs. 25.56 crore via this issue. Minimum application is to be made for 800 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue constitutes 26.43% of the post issue paid up capital of the company. Issue is solely lead managed by Aryaman Financial Services Ltd. while Link Intime India Pvt. Ltd. is the registrar to the issue. Having raised initial equity at par, it raised further equity in the price range of Rs. 50 to Rs. 100 per share between January 2011 and May 2015. It has also issued bonus shares in the ratio of 3 for 1 in March 2018. Average cost of acquisition of shares by the promoters is Rs. 15.88 and Rs. 15.99 per share. Post issue its current paid up equity capital of Rs. 3.95 cr. to Rs. 5.37 cr.
FINANCIAL PERFORMANCE:
On performance front, for last four fiscals, SGL has posted turnover/net profits of Rs. 127.77 cr. / Rs. 0.82 cr. (FY15), Rs. 183.31 cr. / Rs.0.94 cr. (FY16), Rs. 164.41 cr., . Rs. 0.94 cr. (FY17) and Rs. 548.90 cr. / Rs. 2.63 cr. (FY18). Sudden jump in pre-IPO year for top and bottom line is the major concern and raises doubt on sustainability of the same performance going forward. For last three fiscals, it has posted an average EPS of Rs. 4.52 and an average RoNW of 14.21%. Issue is priced at a P/BV of 5.11 based on its NAV of Rs. 34.11 as on 31.03.18 and at a P/BV of 2.48 on the basis of post issue NAV of Rs. 72.68. Based on superb earnings of FY18 the asking price is at a P/E of around 37 making it aggressively priced offer as industry average is around 31.
COMPARE WITH LISTED PEERS:
As per offer documents, it has shown Patdiam, Kenvi and Renaissanse as its listed peers that are currently trading at a P/E of around 36, 84 and 15 respectively (as on 17.09.18). All these are not strictly comparable with SGL.
MERCHANT BANKER’S TRACK RECORD:
On merchant banker’s front, this is the 38th mandate from its stable in last four fiscal years. Out of last 10 listings, 1 opened at discount, 3 around par and the rest with premium ranging from 1 to 6% on the day of listing. Thus it has poor track record.
Currently sentiment for jewellery sector is very weak. Company’s financial too are not that appealing except FY18 which raised IPO with superb earnings in pre-IPO year. Pricing of the issue is very aggressive and major chunk of fund is going for repayment of loans from promoters. There is no harm in giving this issue a miss.
Review By on September 17, 2018
Dilip Davda is a veteran financial journalist associated with the Indian stock market since 1978. He has been contributing to print and electronic media on capital markets, insurance, and finance since 1985.
He is widely recognized for reviewing public issues and non-convertible debentures (NCDs) in the primary market. Drawing on over three decades of market experience and close interaction with merchant bankers, his reviews focus on detailed fundamental and financial analysis of companies, with a special emphasis on SME public issues.
Dilip Davda
SEBI Registered Research Analyst – Mumbai
Registration No.: INH000003127 (Perpetual)
Email: dilip_davda@rediffmail.com
Disclaimer: The information provided herein is solely for educational and informational purposes and does not constitute an offer, solicitation, or recommendation to buy or sell any securities. Readers are advised to consult a qualified financial advisor before making any investment decisions. Investments in the securities market are subject to market risks. The author does not intend to invest in the securities discussed.
The initial public offer (IPO) of Sky Gold Ltd. offers an early investment opportunity in Sky Gold Ltd.. A stock market investor can buy Sky Gold IPO shares by applying in IPO before Sky Gold Ltd. shares get listed at the stock exchanges. An investor could invest in Sky Gold IPO for short term listing gain or a long term.
Read the Sky Gold IPO recommendations by the leading analyst and leading stock brokers.
Sky Gold IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Sky Gold IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts mentioned in the above answer to "How is Sky Gold IPO?"
Our recommendation for Sky Gold IPO is to avoid.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Sky Gold IPO.
The Sky Gold IPO allotment status will be available on or around September 26, 2018. The allotted shares will be credited in demat account by September 28, 2018. Visit Sky Gold IPO allotment status to check.
