Suumaya Lifestyle NSE SME IPO review (May apply)

 Suumaya Lifestyle Ltd. (SLL) which was originally incorporated as Richway Infrastructure Ltd. and rechristened itself as Richway International Ltd. and was a listed company on BSE ITP platform and opted for delisting in June 2017 has now changed its business model and has renamed itself as Suumaya Lifestyle Ltd. and is now planning to list on NSE SME. In the process even entire management got changed hands. SLL is carrying out the business of manufacturing and trading of dress materials, suits, sarees, kurtis etc. Pursuant to the business transfer agreement SLL acquired assets and liabilities of Suumaya Fashions and all the manufacturing operations were consolidated. It also kept moving its registered office during all the above process.  Company markets products under the brand name “ekka”, “ira” and “tag 9 in retail and wholesale business. It also serves customers through a range of channels such as retail and wholesale. However, company do not derive any revenues from such sale, but it takes place under logo Suumaya in the corporate and trading names.

To part finance its working capital needs,  SLL is coming out with a maiden IPO of 7688000 equity shares of Rs. 10 each at a fixed price of Rs. 18 per share to mobilize Rs. 13.84 crore. Issue opens for subscription on 22.05.18 and will close on25.05.18. Minimum application it to be made for 8000 shares and in multiples thereof , thereafter. Post allotment, shares will be listed on NSE SME Emerge. Issue consists of fresh equity issue of 1888000 shares and offer for sale of 5800000 shares. Issue constitutes 32.98% of post issue paid up equity capital of the company. Issue is solely lead managed by Gretex Corporate Services Pvt. Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. After raising initial equity at par on incorporation and in March 2014, it issued further equity in the price range of Rs. 50 to Rs. 1000 and has also issued bonus shares in the ratio of 9 for 1 November 2013. Average cost of acquisition of shares by the promoters is Rs. 11 and Rs. 18 per share. Post issue, its current paid up equity capital of Rs. 22.12 cr. will stand enhanced to Rs. 24.00 crore. Company’s debt equity ratio as on 31.12.17 is 0.32.

On performance front, for last four fiscals, SLL has posted turnover/net profits of Rs. 15.47 cr. / Rs.  0.12 cr. (FY14), Rs. 37.16 cr. / Rs. 0.05 cr. (FY15), Rs. 90.53 cr. / Rs. 0.32 cr. (FY16) and Rs. 212.06 cr. / Rs. 0.45 cr. (FY16). Surprisingly it has earned net profit of Rs. 1.72 crore on a turnover of Rs. 242.29 cr. for first nine months ended on 31.12.17 of FY18. Although top line has shown northward march for all these years, bottom line has shown erratic movements. For last three fiscals it has posted an average EPS of Rs. 0.15 and an average RoNW of 1.46%. Issue is priced at a P/BV of 1.59 on the basis of its NAV of Rs. 11.34 as on 31.12.18 and 1.56 on the basis of post issue NAV of Rs. 11.57. If we annualize latest earnings and attribute it on fully diluted equity post issue then asking price is at a P/E of around 19 against industry average of 35. But sustainability of its super profits earned for 9 months of FY18 is a million dollar question.

On merchant banker’s front, this is 11th mandate from its stable in last three fiscals. Out of last 10 listings, 3 opened at discount, 3 at par and 6 opened with a premium ranging from 1.9% to 8% on the day of listing.