Yash Optics NSE SME IPO review (May apply)

•    The company is engaged in the business of providing wide array of vision correction solutions.
•    It has a vide portfolio of spectacle/optical lenses from single vision to advanced progressive lenses.
•    For the reported periods, it marked growth in its top and bottom lines. 
•    Based on FY24 annualized earnings, the issue appears fully priced. 
•    Well-informed investors may park funds for the medium to long term rewards. 

ABOUT COMPANY:
Yash Optics & Lens Ltd. (YOLL) was initially engaged in trading and distribution of spectacle and optical lenses which were sourced from Indian importers and traded in Mumbai. Over the years, it has increased product portfolio with brands like Seto, IRIS etc. and expanded its network & distribution channel in Maharashtra, Gujarat and Rajasthan. Under the trading space, the company sources the spectacle/optical lenses and market the same under its own brands for further sale through distributors and own retail channels.

The Company provides wide array of vision correction solutions. It is primarily engaged in the business of manufacturing, trading, distribution and supplying of comprehensive range of spectacle/optical lenses. The company is offering from single vision lenses to advanced progressive lenses, customized progressive lenses to personalized progressives for professionals along with wide range of coatings. Its products are available across the entire range of price points enabling it to serve the entire gamut of customers from economy. The company manufactures the lenses based on order and prescription received from the customers.

The company started its journey in the year 2002 with trading and supplying spectacle / optical lenses under the name of M/s Yash Optics, a proprietary firm. In the year 2007 it started importing the lenses under M/s Yash Enterprises, a proprietary firm of Promoter. In the year 2012 the company started manufacturing of prescription lenses under, a proprietary firm.

In order to achieve the synergy benefits from combining the proprietary concern, the Company has acquired M/s Yash Lenses in the year 2021-22 through The Business Transfer Agreement among M/s Yash Lenses and Yash Optics & Lens Private Limited dated April 01, 2021. 

Before the said acquisition, the Company was engaged only in trading and distribution of a wide range of optical and spectacle lenses. Post the said acquisition, YOLL has started manufacturing of spectacle / optical lenses in its own name which was earlier manufactured by Yash Lenses. As of December 31, 2023, it had 106 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 6561600 equity shares of Rs. 10 each to mobilize Rs. 53.15 cr. at the upper cap. It has announced a price band of Rs. 75 - Rs. 81 per share. The issue opens for subscription on March 27, 2024, and will close on April 03, 2024. The minimum application to be made is for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.49% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 18.25 cr. for capex on manufacturing unit for backward integration, Rs. 11.86 cr. for purchase of plant and machinery for existing manufacturing unit, Rs. 6.00 for repayment of certain borrowings, Rs. 10.00 cr. for working capital, and rest for general corporate purposes.

The issue is solely lead managed by Shreni Shares Ltd., and Bigshare Services Pvt. Ltd. is the registrar of the issue. Rikhav Securities Ltd. is the market maker for the company. 

The company has issued initial equity capital at par and raised further equity at a fixed price of Rs. 61 per share in January 2024. It has also issued bonus shares in the ratio of 1770 for 1 in December 2023. The average cost of acquisition of shares by the promoters is Rs. 0.02, Rs. 0.08 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 18.20 cr. will stand enhanced to Rs. 24.77 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 200.60 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 14.98 cr. / Rs. 1.06 cr. (FY21), Rs. 29.86 cr. / Rs. 6.82 cr. (FY22), and Rs. 39.80 cr. / Rs.8.07 cr. (FY23). For H1 of FY24 ended on September 30, 2023, it earned a net profit of Rs. 4.23 cr. on a turnover of Rs. 18.69 cr. The sudden boost in top and bottom lines from FY22 raise eyebrows. 

For the last three fiscals, it has reported an average EPS of Rs. 3.66, and an average RONW of 45.82%. The issue is priced at a P/BV of 6.15 based on its NAV of Rs. 13.18 as of September 30, 2023, and at a P/BV of 2.52 based on its post-IPO NAV of Rs. 32.10 per share (at the upper cap).

If we attribute annualized FY24 earnings to its post-IPO fully diluted paid-p capital, then the asking price is at a P/E of 23.75. Thus the issue appears fully priced discounting all near term positives.

For the reported periods, the company has posted PAT margins of 7.11% (FY21), 22.91% (FY22), 20.32% (FY23), 22.62% (H1-FY24), and RoCE margins of 15.50%, 48.91%, 30.28%, 10.38% respectively for the referred periods. 

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown GKB Ophthalmics as their listed peers. It is trading at a P/E of 00 (as of March 22, 2024). However, they are not comparable on an apple-to-apple basis.

MERCHANT BANKER'S TRACK RECORD:
This is the 29th mandate from Shreni Shares in the last three fiscals, out of the last 10 listings, all opened with premiums ranging from 7.5% to 143.24% on the listing day.