A G Universal Limited

Lead Reclaim And Rubber Products Limited is in the business of manufacturing of reclaimed rubber, crumb rubber powder and rubber granules. Company focuses ona) Saving valuable natural resources by way of recycling; and b) Helping the customers fulfil their circularity aspirations through use of the reclaimed rubber products. They are one of the few companies in the reclaimed rubber industry that can process radial rubber, scrap tyre and tube rubber. Company's manufacturing facility is situated at Sarali Road Village - Pithai, Taluka Kathalal, Kheda – 387630, Gujarat, which is spread over a total land area of approximately 7790 Sq. mts. with the existing plant occupying approximately 2253 Sq. mts with the total install capacity of 5520 metric tons.  Our Product Portfolio offers a diversified product range which includes variety of grades, thickness, widths and standards of various grades of whole tyre reclaim rubber, butyl reclaim rubber and natural reclaimed rubber. Currently, they sell the products to companies in the automotive manufacturing sector, distributors and dealers. They also sell the products to foreign buyers located in Sri Lanka, Argentina, Turkey, China, etc through merchant exporters. Company's revenue from exports (including sales through merchant exporter) for the six months period ended September 30, 2022 and for the FY 2022 and FY 2021 has been Rs. 162.60 Lakhs, Rs. 522.39 Lakhs and Rs. 15.75 Lakhs, respectively which constituted 33.02%, 50.71% and 2.24% of the revenue from operations for the respective fiscal. Company has employed 25 employees. As per financial performance, A G Universal Limited has posted total income/net profits of Rs 20.08 Cr / Rs 0.049 Cr (FY20), Rs 38.64 Cr / Rs 0.14 Cr (FY21), Rs 70.74 Cr / Rs 0.70 Cr (FY22) and Rs 35.95 Cr / Rs 1.14 Cr (upto H1 FY23). So company has shown good sales growth, but jump in net profit just before IPO is very surprising. Also company is working with very thin margin. Company has posted an average EPS of Rs 9.18/- and average RoNW of 16.72% for last three fiscals. Issue is priced at a P/BV of 4.87 as per NAV of Rs 12.33/- post issue. As per FY22 earnings on fully diluted equity post issue, asking price is at P/E of around 46.47 and as per annualised FY23 earnings P/E 14.41 As per RHP, there are listed peers available. On BRLM's front, Share India Capital Services Pvt. Ltd is associated with this IPO and not handled any SME IPO in last 3 years.  As Per financials, A G Universal Limited has shown good sales growth, RoNW is 27.10% and P/E is respectively 46.47 and 14.41 as per FY22 and annualised FY23 earnings, which looks aggressively priced. Also company is in trading of industrial MS Tubes, GI Pipes, and Hollow Sections which is highly competitive and fragmented. So we are giving AVOID rating to this SME IPO.

• 1 Mr. Amit Gupta
• 2 Ms. Bharti Gupta