Godha Cabcon & Insulation Limited

Started in 2016, Indore - Madhya Pradesh based Godha Cabcon & Insulation Limited is engaged in the business of manufacturing of ACSR/AAAC/AAC Conductors. The company's sales/supply activities are tender/order based. It was successful in getting various tenders and orders from State Electricity Board in a timely manner. The company is all set to continue its growth momentum with higher installed capacity and good order book position. The prospects are even brighter in view of future procurement plan of state electricity companies. GCIL is also targeting Power Grid Corporation of India Limited to bring its products at national level. It was a proprietary concern till July 2017 and thereafter taken over by the company. It has installed capacity of 15000 MTPA. It has 16 permanent employees at its manufacturing facility. As per financial performance, as a proprietary firm it has posted total income/net profits of Rs. 16.81 cr. / Rs. 0.15 cr. (FY15), Rs. 44.11 cr. / Rs.0.68 cr. (FY16) and Rs. 74.37 cr. / Rs. 1.37 cr. (FY17). For FY18, for the period upto 15.07.17 it has posted net profit of Rs. 0.77 cr. on a total income of Rs. 21.62 crore and then net profit of Rs. 0.93 cr. on a total income of Rs. 21.23 cr. for period ended 31.10.17. Its paid up equity of Rs. 0.02 cr. as on 31.03.17 increased to Rs. 5.89 crore as on 31.10.17. GCIL has posted an average EPS of Rs. 1.44 for last nineteen months with a negative RoNW. Issue is priced at a P/BV of 2.14 at the upper price band on the basis of its NAV of Rs. 15.42 as on 31.10.17. If we combine two broken periods and annualise the working and attribute it on fully diluted post issue equity, then asking price is at a P/E of around 12 but then increase in bottom line is very high and it may not be possible to sustain. As per offer documents it is showing APAR Ind as its listed peer that is trading at a P/E of around 20 (as on 20.04.18.). On the working scale basis both are not comparable in true sense. Based on FY 17 earnings, issue is priced at P/E of 27, which looks aggressively priced.  On merchant banker’s front, this is the 3rd mandate from its stable and last 2 issues opened at a premium ranging from 6% to 12.78% on the day of listing. As per financials, company's performance is good, it has shown consistent growth and issue is aggressively priced as per FY17 earnings. So we give NEUTRAL rating to this SME IPO as per current market situation.

• 1 Mrs. Madhu Godha
• 2 Mrs. Rupali Godha
• 3 Mr. Dipesh Godha