Empyrean Cashews Limited

Empyrean Cashews Limited commenced operations in 2014 under the name and style of the brand 'Krishival Cashews'. The Company is engaged in processing raw cashew nuts into finished cashew kernels in different flavours, with a presence in more than 26 tier II and tier III towns and cities. They primarily cater to the domestic market with a network of more than thirty (30) distributors across India. They procure majority of their raw materials by way of import from certain African and Asian countries and also from the Konkan region of India.  In addition to processing raw cashews they are also engaged in the business of organic manure which is prepared by using by-products like husk and other biodegradable material left after processing of the raw cashews. Based on the audited restated financials for FY 2021, 93% of company revenue is derived from sale of cashews whilst remaining 7% is derived from sale of organic manure. The Company has following grades available in 100 grams, 250 grams, 500 grams as well as 10 kilograms packings: (a) Premium grades such as W180, W210, P210, W240 and P240 (b). Other grades include W320, P320, W400, SSW, DW, RW, KW, JJH, JH, JK, LWP, SP, SWP, BB as well as flavoured cashew. As per financial performance, Empyrean Cashews Limited has posted total income/net profits of Rs 50.47 Cr / Rs 0.64 Cr (FY19), Rs 44.38 Cr / Rs 0.95 Cr (FY20), Rs 28.58 Cr / Rs 0.66 Cr (FY21) and Rs 27.22 Cr / Rs 1.66 Cr (7M FY22). So company has shown decline in sales, but in last 7 months profit seen sharp rise which is very surprising. Company has posted an average EPS of Rs 0.53 and average RoNW of 3.99% for last three fiscals. Issue is priced at a P/B of 1.81 as per NAV of Rs 20.47 post issue. As per FY21 earnings on fully diluted equity post issue, asking price is at P/E of around 109.81 and as per annualised FY22 earnings P/E is 25.64. As per RHP there are no listed peers.     On BRLM's front, Systematix Corporate Services Private Limited  associated with this SME IPO and has not handled any SME IPO in last 3 years. ( as on 21.03.22 ) As per financials, Empyrean Cashew Limited has shown declining results, RoNW is 3.99% and P/E is respectively 109.81 and 25.64 as per FY21 and annualised FY22 earnings, which looks aggressively priced, and sudden rise in profit in 7M result for current FY raises concerns. So we are giving AVOID rating to this IPO.

• 1 Aparna Morale Bangar
• 2 Nana Parakash Mhaske
• 3 Anant Pandurang Kulkarni