Esprit Stones Limited is primarily engaged in the manufacturing of Engineered Stones such as: (i) engineered quartz surfaces; and (ii) engineered marble surfaces. The Company majorly manufactures engineered quartz surfaces and through the Subsidiary, HSPL, they manufacture engineered marble surfaces. Engineered Stones are ideal for its application for vanities & bathroom surfaces, kitchen countertops, floors and wall cladding furniture, and other interior surfaces that are used in a variety of residential and non-residential applications. Company has customized the manufacturing processes in order to maximize the consistency, quality, durability and crack resistance of the Engineered Stones while also increasing its slickness and luster. Additionally, through the Subsidiary, Addwaya Chemicals, they are also engaged in the manufacturing of unsaturated polyester resin which is one of the key raw materials in manufacturing of Engineered Stones. The Company is promoted by two business houses from Udaipur, Rajasthan namely, Aravali group and Gattani group. As on date, the Manufacturing Facility I is equipped with three (3) pressing lines and two (2) polishing lines with a production capacity of around 72 lakhs sq.ft. per annum. Additionally, they commissioned the Manufacturing Facility II for manufacturing of quartz grit and quartz powder which is the primary raw material for manufacturing of engineered quartz. Thereafter, in order to further reduce the dependency on third-party raw material suppliers of unsaturated polyester resin, which is an important ingredient for manufacturing of Engineered Stones, the Company, through the Subsidiary namely, Addwaya Chemicals, started manufacturing of unsaturated polyester resin at Manufacturing Facility III having an annual capacity of around 18 thousand metric tonnes. In the year 2022, the Company through the Subsidiary, HSPL has commenced manufacturing and processing of engineered marble surfaces at the Manufacturing Facility IV which is equipped with one (1) pressing line, two (2) gangsaw and one (1) polishing line and having an annual capacity of around 74 lakhs sq. ft. Company markets and sells the Engineered Stones in domestic as well as international markets through a combination of direct export sales and a network of independent distributors in the domestic market. As on the date of this Red Herring Prospectus, they are exporting to over 10 countries including USA, Canada, Egypt, Bulgaria, UAE, Saudi Arabia, etc. under white labelling. A majority of the sales comprise of export sales. During the Fiscals 2024, 2023 and 2022, they derived 59.87%, 72.75% and 92.44% of the sales from exports, respectively. Further, out of the total exports, 94.43%, 97.51% and 96.47% are exported to USA during the Fiscals 2024, 2023 and 2022 respectively. Further during Fiscal 2024 and 2023 the Company made 64.43% and 25.73% of the export sales to USA through the foreign subsidiary, Haique Stones Inc. Company has extended the reach to 15 states in the country through the distributors network. The Company is in the process of setting up of an experience centre at Kishangarh, Rajasthan, the marble city of India. Additionally, the Company also has a storage facility and sales office in Mumbai, Maharashtra. As per financial performance, Esprit Stones Limited has posted total income / net profits of Rs 190.02 Cr / Rs 18.50 Cr (FY22), Rs 176.06 Cr / Rs 3.55 Cr (FY23) and Rs 274.77 Cr / Rs 10.31 Cr (FY24). So as per previous financials data, company has shown good sales growth, but net-profit declined. Also debt is high. Company has posted an average EPS of Rs 5.77 and average RoNW of 15.64% for last three fiscals. Issue is priced at a P/BV of 1.56 as per NAV of 55.93 as on post issue. If we attribute latest earnings of FY22, FY23 and FY24 on fully diluted equity post issue, then asking price is at a P/E of around 10.32, 53.67 and 18.51 respectively, which looks fully priced. As per RHP, comparison between listed peers is shown in above table. On BRLM's front, Choice Capital Advisors Private Limited is associated with this SME IPO and handled 2 IPOs in last 2 years. From last 2 IPOs, all opened above issue price on the day of listing. As of now from last 2 IPOs, all are trading above issue price. ( As on 24.07.24 ) On BRLM's front, Srujan Alpha Capital Advisors LLP is associated with this SME IPO and handled 2 IPOs in last 2 years. From last 2 IPOs, all opened above issue price on the day of listing. As of now from last 2 IPOs, all are trading above issue price. ( As on 24.07.24 ) As per financials, Esprit Stones Limited has shown good sales growth, RoNW is 15.09% and P/E is respectively 10.32, 53.67 and 18.51 as per FY22, FY23 and FY24 earnings. So, issue looks fully priced, but company has shown de-grow in net-profit, net-profit margin is also very low and debt is very high. Company is engaged in the manufacturing of the Engineered Stones, which is highly fragmented and competitive business segment. Performance of BRLM is good. So, we give NEUTRAL rating for this IPO. One may apply for listing gains. Readers must consult a qualified financial advisor prior to making any actual investment decisions.
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