Ahlada Engineers Ltd

Started in 2005, Ahlada Engineers Ltd is Hyderabad based manufacturer of steel doors, windows, and clean room equipment. Company's customer base includes the pharmaceutical, biotechnology, food, healthcare, entertainment and real estate industries. Ahlada Engineers has inked an agreement with Tata Steel to manufacture and supply steel doors (which is sold by Tata Steel Ltd under their brand name "PRAVESH"). The company manufactures and supplies steel doors and windows to other industrial customers as well. Ahlada Engineers has 3 manufacturing facilities, an assembly unit and a stockyard located on the outskirts of Hyderabad city. The company has in-house research, design and quality teams. Currently company has installed capacity of 1,32,000 steel doors per year and capacity utilisation in FY18 was 83%. Company is planning to increase capacity to 3,40,400 steel doors per year with capacity utilisation of 88% for FY19. So company expects good growth in next couple of years. As on May 31, 2018, company had 356 full time employees and 1060 contract employees. As per the financial performance, AEL has posted turnover/net profits of Rs. 79.14 cr. / Rs. 2.65 cr. (FY14), Rs. 96.31 cr. / Rs. 2.59 cr. (FY15), Rs. 111.47 cr. / Rs. 3.06 cr. (FY16), Rs. 118.55 cr. / Rs. 3.27 cr. (FY17) and Rs. 127.89 cr. / Rs. 8.09 cr. (FY18). Thus it has posted gradual growth in top and bottom lines., but sudden jump in bottom-line for FY18 generates questions. As per company this multifold increase in PAT majorly due to the agreement with Tata Steel which helped them decrease in other expenses and streamlining of various processes resulting in higher PBT and PAT. Issue is priced at a P/BV of 3.61 on the basis of its NAV of Rs. 41.57 as on 31.03.18. For last three fiscals, it has posted an average EPS of Rs. 6.45 and an average RoNW of 16.97%. If we take into account latest earnings and attribute it on fully diluted equity post issue then asking price is at a P/E of around 24. So issue appears fully priced. On BRLM's front, for Saffron Capital Advisors Private Limited this is the 2nd IPO and last IPO opened above issue price with 20% premium and currently trading below issue price. ( As on 31.08.18 ) As per financials, company's performance is very consistent, RoNw is 16.97% for last three fiscal and issue is fully priced as per latest earnings. Sudden jump in bottom line for FY18 raises concerns. Company has made agreement with Tata Steel and this will help them to grow in next couple of years. This is second IPO from the BRLM. So we give NEUTRAL rating to this SME IPO as per current market situation.

• 1 Mr. Chedepudi Suresh Mohan Reddy