ASHAPURI GOLD ORNAMENT LIMITED FPO

Started in 2008, Ashapuri Gold Ornaments Limited is engaged in business of wholesale trading of Jewellery till March 2019. The Jewelries were manufactured on Job-work basis at Ahmedabad and Rajkot. The company design, manufacture and sell a wide range of gold, studded jewellery and other jewellery products across various price points. The product portfolio includes Wedding Jewellery, Festive Jewellery, Rings, Chain, Earrings, Ear Chain, Nose-rings/Nose pins, Waist belts, Mangalsutra, Anklet, Zuda, Toe Ring, Pendant Set/ Pendant, Bracelet and Bangles. The company have appointed sales team for different region/city like Delhi, Rajasthan, Punjab, Uttar Pradesh, Kolkata, Chennai, Bangalore, etc for further expansion of business. The company is well known and trusted wholesaler of gold jewellery supplier, having showroom of 2945 sq. feet on prime location of C.G. Road, Ahmedabad, the newly developed main market for buying Gold and Diamond Jewellery. The design of the products is done either in house or by third parties on the behalf and get the Jewelleries manufactured on job work basis. The company deal in antique Jewellery too. In addition to the above, company is also in the trading of Gold Jewellery. On the financial performance front, Ashapuri Gold Ornaments Limited has reported turnover/net profits (loss) of  Rs. 46.96 cr. / Rs. 0.07 cr. (FY18), Rs. 88.20 Cr. / Rs. 0.38 Cr. (FY19) and Rs. 120.58 Cr. / Rs. 0.47 Cr in FY20 . For upto H1 of FY21, company has posted 22.29 Cr total income and 2.44 Cr net profit. So sudden jump in net profit just before FPO raises questions as this period was peak of Pandemic lock-down and company has posted best ever 6M net profit. For the last three years, company has posted average EPS of Rs. 0.18 and RoNW of 8.69%. The issue is priced at a P/BV of 2.46 based on its NAVs of Rs. 30.05 post issue. As per FY20 earnings, on fully diluted equity post issue, IPO is priced at P/E of around 428. If we annualise latest earnings of FY21 on fully diluted equity, than P/E is around 41. So issue looks very aggressively priced.  On BRLM's front Mehta Integrated Private Limited has not handled any IPO in last three fiscals. For Ashapuri Gold Ornaments Limited, very limited financial data is available, RoNW is 1.05%, P/E is around 428 for FY20 and 41 for annualised FY21. So issue looks very aggressively priced. Also sudden jump in net profit is also raises questions. Jewellery sector has very high competition and BRLM has no track record in past 3 years. This is FPO from the company and company is currently trading at Rs 79.25. So we give AVOID rating to this SME IPO.

• 1 MR. Saremal Soni
• 2 MR. Dinesh Soni
• 3 MR. Jitendra Soni