SMVD Poly NSE SME IPO review (May apply)

SMVD Poly Pack Ltd. (SMVD) is engaged in the business of manufacturing of PP (Polypropylene)/HDPE (High Density Polyethylene) woven sacks bags & Sacks, Leno Bags, Jumbo (Flexible Intermediate Bulk Container) FIBC Bags & HDPE Tarpaulin. The Company started its Operations with initial capacity of 1200 MT per annum and at present has the installed capacity of 4420 MT per annum. The manufacturing facility of the Company is situated at the prime location in Parganas District of West Bengal close to and well connected with Kolkata Port and Airport, Haldia Port. With its policy and commitment to produce the best quality products, SMVD has been able to establish itself as one of the leading manufacturer of PP/HDPE Woven Sack Bags, FIBC and HDPE Tarpaulin. At present it serves both B2B and B2C sectors. It’s customers segment include fertilizer plants, Food Corporation of India, Mining & chemical industries, flour mills, ceramic industries, Steel Industries, Plastic compounds, Rice Plants, Poultry Farms etc.

To part finance its business expansion plans, working capital and general corpus fund needs, SMVD is coming out with a maiden IPO of 1640000 equity shares of Rs. 10 each at a fixed price of Rs. 55 per share to mobilize Rs. 9.02 crore. Issue opens for subscription on 13.12.17 and will close on 15.12.17. Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. Post allotment shares will be listed on NSE SME Emerge. Issue is solely lead managed by Corporate Capitalventures Pvt. Ltd. and Skyline Financial Services Pvt. Ltd. is the registrar to the issue. Issue constitutes 33.03% of the post issue paid up capital of the company. The average cost of acquisition of the shares by the promoters ranging from Rs. 13.26 to Rs. 26 per share. After issuing equity shares at par on incorporation, it raised further equity in the price range of Rs. 20 to Rs. 65 per share between March 2010 and December 2014. It has also issued bonus shares in the ratio of 3 shares for every 2 shares held in July 2017. Post issue, its current paid up equity capital of Rs. 3.33 crore will stand enhanced to Rs. 4.97 crore.

On performance front, SMVD has (on a consolidated basis) posted turnover/net profits of Rs. 23.80 cr. / Rs. –(0.20) cr. (FY14), Rs. 29.39 cr. / Rs. 0.07 cr. (FY15), Rs. 29.82 cr. / Rs. 0.06 cr. (FY16) and Rs. 36.13 cr. / Rs. 1.19 cr. (FY17). For four months ended on 31.07.17 of the current fiscal, it has reported net profit of Rs. 0.60 crore on a turnover of Rs. 17.17 crore. Thus last sixteen months performance is a bit surprising. Issue is priced at a P/BV of 2.34 on the basis of its NAV as on 31.07.17 and at a P/BV of 1.80 on the basis of its post issue NAV. For last three fiscals it has posted an average EPS of Rs. 1.89 and an average RoNW of 8.87% on an equity capital of Rs. 1.33 crore. If we annualize latest earnings and attribute it on post issue equity capital then asking price is at a P/E of around 15 against industry average of around 18. Thus issue appears fully priced.

On merchant banker’s front, this is the 3rd mandate from its stable in past three years. The only listing (Shish Ind.) took place at a premium of around 7% on the day of listing.

Conclusion: Considering fully priced issue with a surprising performance for last sixteen months period, risk savvy cash surplus investors may consider investment for long term. (Other).