Sumit Woods NSE SME IPO review (May apply)

•    Realty developer having local play
•    Completed 49 projects, ongoing 9 projects
•    FY 18 earnings due to well planned financial closure.
•    Orders on hand worth Rs. 300 crore plus
•    Appealing Issue priced around 9 PE

ABOUT COMPANY:
Sumit Woods Ltd. (SWL) that started civil construction business in Goa as a partnership firm is now converted into a public limited company.  It executed projects for Modern Bread, Railway Officers and Government Holiday Homes. Currently SWL is engaged in constructions of residential buildings, re-development and SRA area developing. It has already completed 49 projects in Goa and Maharashtra (particularly in Mumbai and Thane region). Currently it has around 9 ongoing projects out of which 6 are in Maharashtra and 3 in Goa. According to management, they are designing and developing projects based on local demand and environment as per the preference of local public. It caters to middle and higher middle class population. Company is known for timely completion of projects and is also registered with RERA.

CAPITAL HISTORY/ISSUE DETAILS:
To part finance its plans for repayment/pre-payment of certain debts, working capital, and general corporate fund needs, SWL is coming out with a maiden IPO of 4053000 equity shares of Rs. 10 each via book building issue. It has fixed the price band of Rs. 43 – Rs. 45 per share and mulls mobilization of  Rs. 17.43 cr. to Rs. 18.24 cr. (based on lower and upper price bands). The issue opens for subscription on 29.08.18 and will close on 31.08.18. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue is solely lead managed by Mark Corporate Advisors Pvt. Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Issue constitutes 26.50% of the post issue paid up capital of the company.

Having issued initial equity at par, SWL raised further equity in the price range of Rs. 40 to Rs. 360 per share between October 2009 and May 2018. It has also issued bonus shares in the ratio of 4 for 11 shares in November 2017. Post issue, SWL’s current paid up equity capital of Rs. 11.24 cr. will stand enhanced to Rs. 15.29 cr. The average cost of acquisition of shares by the promoters is Rs. 4.97, Rs. 7.33, Rs. 8.83 and Rs. 18.23 per share.

FINANCIAL PERFORMANCE:
On the performance front, for last four fiscals, SWL has (on a consolidated basis) posted total turnover/net profits of Rs. 29.51 cr. / Rs. 0.85 cr. (FY15), Rs. 29.61 cr. / Rs. 0.75 cr. (FY16), Rs. 46.97 cr. / Rs. 3.13 cr. (FY17) and Rs. 34.33 cr. / Rs.7.74 cr. (FY18). This sudden spurt in bottom lines for FY17 and FY18 is raising eyebrows.  For the last three fiscals, on a consolidated basis, it has posted an average EPS of Rs. 4.67 and an average RoNW of 10.76%. The issue is priced at a P/BV of around 1 on the basis of its NAV of Rs. 45.66 as on 31.03.18 that will stand Rs. 45.48 post issue. If we take into account latest superb earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 9 (at upper price band) against industry average P/E of 20. This issue is attractively priced. According to management, it follows SPV (special purpose vehicles) method for developments of each project on profit sharing basis. Due to this top line is going in those SPV’s account with related expenses and only the share of profit comes to SWL and that’s the reason for the sudden spurt in the bottom line. At present, it has work on hand of approx. Rs. 300 cr. plus and management is confident of maintaining its margin trends.

LISTED PEERS COMPARISION:
As per offer documents, it has shown Ashiana Housing and Arihant Superstructures as its listed peers that are currently trading at a P/Es of around 31 and 22. Even recent IPO of Karda Construction is trading around 17 P/E. (as on 21.08.18)

MERCHANT BANKER’S TRACK RECORD:
On merchant banker’s front, this is the 4th mandate from its stable and out of last 3 listings 1 opened at discount and the rest 2 with a premium ranging from 6.06% to 12.78% on the day of listing.