Foce India Limited, started in 2001, is mainly engaged in the business of supply, distribution and retailing of various types of wrist watches such as Analog, Digital, Chronograph, Designer etc. which are either custom built or general in nature. Company supplies wrist watches in bulk to the top 5 Institutional Customers and such watches are made in their own brand name constituting approximately 95% of the total revenue. Among these top customers, they have a single largest customer constituting almost 91% of company's total revenue. Apart from this, they distribute and do retailing of wrist watches made under Brand Name 'FOCE' (the brand is owned by one of the Promoter, Mr. Manoj Sitaram Agarwal) across India which constitutes around 2% of company's total revenue. Further, they are also involved in the business of corporate gifting (such as Time Piece, Wall Clocks, Belts, Ties, Wallets, Pens, Goggles etc.), ornamental packaging boxes for watches, selling of watches and other products under royalty brands which constitutes around 3% of the total revenue. Company is procuring the entire requirement of watches and other products from its group concern namely M/s Foce Industries, a partnership firm, which is engaged in the business of manufacturing / assembling of wrist watches at Guwahati, Assam. On April 06, 2021, they have incorporated a wholly owned subsidiary company namely FO Industries Private Limited in Mumbai with an object to carry on the business of manufacturing / assembling of watches and other products and the facilities is being located at Bhiwandi, Near Mumbai. This subsidiary was incorporated to increase supply of finished products and minimize the dependency on the group concern. This subsidiary is likely to commence its business in the month of December, 2021 and the funds required for investment in subsidiary is met out of the internal accrual of the company. On the financial performance front, Foce India Limited posted turnover/net profits (loss) of Rs. 62.08 Cr. / 1.58 Cr. (FY19), Rs. 54.44 Cr. / 1.60 Cr. (FY20), Rs. 76.89 Cr. / 1.98 Cr. (FY21) and Rs 36.16 Cr. / 1.52 Cr. (Q1 FY22). So company has posted growth and super profit in Q1 FY22 is surprising. For the last three years, company has posted average EPS of Rs. 4.72 and RoNW of 19.95%. The issue is priced at a P/BV of 7.37 based on its NAV is of Rs. 30.51 on 30.06.21. As per FY21 earnings, on fully diluted equity post issue, IPO is priced at P/E of around 55.35, and as per FY22 annualised earnings, P/E is around 18.08, which looks fully priced. Comparison between listed peers in shown above table, but it can't be compared apple to apple basic. On BRLM's front, Mark Corporate Advisors Limited associated with this SME IPO and handled 6 IPOs in last 3 years. From last 6 IPOs, five opened below issue price and remaining above issue price or at par. As of now from 6 IPOs, three are trading below and remaining is trading above issue price or at par As on (09.12.21 ) For Foce India Limited financials are good, RoNW is 18.66% and P/E is around 55 for FY21 earnings. Super earnings in Q1 FY22, raises questions and if company may sustain it in future, need to be watched. Also dependency on single client, may be problematic. Performance of BRLM is poor. So we give AVOID rating to this SME IPO.
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