White Organic Retail BSE SME IPO review (May apply)

•    This is the second company of 'White' group to tap market after 1995.
•    WORL deals in agro trading and retailing.
•    It has posted super performance for FY18 and 9MFY19.
•    Based on financial parameters, the issue appears attractively priced.
•    LM has an average track record.

ABOUT COMPANY:
White Diamond Ltd. which is a BSE listed company and changed its name in February 2017 to White Organic Agro Ltd. is now coming with other group company IPO of White Organic Retail Ltd. (WORL) (Formerly known as Sapna Infraventure Private Limited). The company was originally promoted for real estate business diversified in 2016 for trading in agricultural products including organic and other products. It also ventured into retailing of the same. Currently, it is trading in Agriculture produce like Cereals, Pulses, Grains, Fruits and Vegetables.

The management has launched the franchisee module for the retail network. In the first phase of expansion the company is looking to set up 40+ retail outlets across Mumbai, Pune, Nasik, Ahmedabad,
Surat, Vadodara, Rajkot. With the help of these distribution network/franchisee model, the management is very optimistic for the value addition and sales growth of the company.

The Company is planning for introducing a wide range of products like; Cow Ghee, Jaggery and Moringa, Sweeteners, Juices, Beauty Products, Snacks, Syrups, Health Powders, Churans, Mukhwas, Incense Sticks, Soap, Aloe Vera Juices, Aloe Vera Gel etc. The company is also planning to launch the capsule range like Amla, Haldi, Jvara etc and medicinal and nutritional powders like Amla, Ashwagandha, Gokharu, Moringa, Rasayan etc. E-Commerce integrated solutions for the Brand 'White Organic' is also underway.

White Organic Agro (erstwhile White Diamond) got listed in 1995 and has since then seen a high of Rs. 138.50 (in 2018) and low of Rs. 0.70 (in 1997) is currently trading around Rs. 24 (for Rs. 10 FV).

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its working capital (Rs. 12.51 cr. ) and general corpus fund needs (Rs. 2.00 cr.), WORL is coming out with an IPO of 2454000 equity shares of Rs. 10 each at a fixed price of Rs. 63 per share to mobilize Rs. 15.46 cr. The issue opens for subscription on 26.04.19 and will close on 02.05.19. Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue constitutes 44.99% of the post issue paid up capital of the company. WORL is spending Rs. 0.95 cr. to raise money from this IPO.

The issue is solely lead managed by Finshore Management Services Ltd. while Link Intime India Pvt. Ltd. is the registrar to the issue. Moneylicious Securities Pvt. Ltd. is acting as a market maker for the issue.  Having issued initial equity at par, it converted the loan into equity at Rs.63 per share in August 2018. It has also issued bonus shares in the ratio of 71 for 1 in July 2018. The average cost of acquisition of shares by the promoters is Rs. 10 and Rs.47.91 per share. Post issue, WORL's current paid up equity capital of Rs. 3.00 cr. will stand enhanced to Rs. 5.45 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, WORL has posted turnover/net profits of Rs. 1.07cr. / Rs. 0.24 cr. (FY16), Rs. 2.55 cr. / Rs. 0.59 cr. (FY17) and Rs. 84.00 cr. / Rs. 3.02 cr. (FY18). For the first nine months of FY19, it has earned a net profit of Rs. 4.51 cr. on a turnover of Rs. 116.35 cr. The sudden spurt in the top and bottom lines for FY18 and 9MFY19 raises eyebrows.

The company has (in last three fiscals) posted an average EPS of Rs.24.27 and an average RoNW of 51.46%. The issue is priced at a P/BV of 0.81 on the basis of its NAV of Rs. 77.89 as on 31.12.18 and at a P/BV of 0.88 on the basis of post issue NAV of Rs. 71.19.

If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 5.71, thus the issue is priced attractively based on its super performance and other parameters like P/BV.

COMPARISON WITH LISTED PEERS:
As per offer documents, WORL has no listed peers to compare with.

MERCHANT BANKER'S PERFORMANCE:
On merchant banker's front, this is the 11th mandate from its stable. Out of last 10 listings, 3 opened at discount, 1 at par and the rest with premiums ranging from 0.02% to 20.66% on the day of listing. Thus it has an average track record.