Add-Shop Promotions Limited

Started in 2013, Rajkot - Gujarat based Add-Shop Promotions Limited is a company engaged in the business of marketing and distribution of ayurvedic, food supplements, agricultural products, animal feed supplement and personal care products under the brand name "Add-Shop Promotions". The company supplies products manufactured by select manufacturers under its brand to retailers and wholesalers. It procures the finished products from certified manufacturers and markets it through various intermediaries and sales agents. Add-shop has tied up with Marss Herbal (India), a manufacturer of herbal and natural use products. The company supplies the manufactured products under "ADD-Shop" brand. To penetrate major markets, Add-shop has entered into an agreement with various collecting and forwarding agents (C&F's) like Panchlingeshwara Enterprises, in Karnataka, Just Need United Trading, Maharashtra, and Good Life Enterprises Telangana. The company has 16 permanent employees on its payroll. As per financial performance, company has posted total income/net profits of Rs. 1.93 cr. / Rs. – (0.04) cr. (FY16), Rs. 4.55 cr. / Rs. 0.15 cr. (FY17) and Rs. 12.55 cr. / Rs. 0.23 cr. (FY18). For first quarter of FY19 it has earned net profit of Rs. 0.16 cr. on a turnover of Rs. 3.84 cr. While FY18 top line grew nearly 300% of FY17, bottom line grew by just 50% for the corresponding periods. As per offer documents, for last three fiscals it has posted an average EPS of Rs. 1.21 and an average RoNW of 31.51%. Issue is priced at a P/BV of 2.36 on the basis of its NAV of Rs. 11.01 as on 30.06.18 and at a P/BV of 1.58 on the basis of post issue NAV of Rs. 16.44. If we annualize FY19 Q1 earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 26 thus it is aggressively priced. It has no listed peers to compare with. On BRLM's front, for Fedex Securities Limited this is the 4th SME IPO. For last 3 IPO, 1 opened below issue price and two at par. Currently from last 3 IPOs, 1 is trading below issue price and 2 above issue price. ( As on 06.08.18 ) Although company has shown progress in top and bottom lines, sudden jump in FY18 working is a bit surprising. Sustainability of the same going forward raises concern. Issue pricing is very aggressive. So we give AVOID rating to this SME IPO.

• 1 Mr Dineshbhai Pandya