Gayatri Rubbers and Chemicals Limited

Gayatri Rubbers and Chemicals Limited is in the manufacturing and trading of rubber profile, aluminum rubber profile, automobile rubber profile, rubber compound, various kinds of rubber components and clear PVC profiles. They supply these rubber products across India to the dealers of Nalco, Banco, Jindal in aluminum sector and the agents of Motherson Sumi and few other state transports in automobile sector. They supply rubber compounds to other rubber product manufacturers and OEMs.  Currently company has the manufacturing unit and registered office located at total area of 3 floors each having an area of approximately 4500 sq. ft. Company's products are as follow:1. Aluminum Rubber Beading2. Automobile Rubber Profiles3. Rubber Compound4. Clear PVC Profiles As on December 31, 2022, the Company has employed 16 employees at various levels of the organization and around 30 contract laborers.. As per financial performance, Gayatri Rubbers and Chemicals Limited has posted total income/net profits of Rs 6.56 Cr / Rs 0.06 Cr (FY20), Rs 15.63 Cr / Rs 0.14 Cr (FY21), Rs 16.73 Cr / Rs 0.81 Cr (FY22) and Rs 17.84 Cr / Rs 0.84 Cr (upto Q3 FY23). So company has shown average sales growth, but jump in net profit just before IPO is very surprising. Company has posted an average EPS of Rs 8.83 and average RoNW of 33.67% for last three fiscals. Issue is priced at a P/BV of 1.87 as per NAV of Rs 16.04/- post issue. As per FY22 earnings on fully diluted equity post issue, asking price is at P/E of around 21.25 and as per annualised FY23 earnings P/E is 15.1. As per RHP, there are no listed peers available. On BRLM's front, Khambatta Securities Limited associated with this SME IPO and has not handled any SME IPO in last 3 years.( As on 24.01.23 ) As per financials, Gayatri Rubbers and Chemicals Limited has shown zig-zag results, RoNW is 52.13% and P/E is respectively 21.25 and 15.1 as per FY22 and annualised FY23 earnings, which looks fully priced. Increase in net profit just before IPO raises doubts. Also company is in rubber business which is highly fragmented and competitive, but also good growth opportunity. So we are giving AVOID rating to this SME IPO.

• 1 Mr. Shilp Chotai
• 2 Mr. Utsav Chotai
• 3 Mr. Manoj Kumar Aggarwal