Gujarat Hy-Spin Limited

Started in 2011, Gujarat Hy-Spin Limited is Rajkot, Gujarat based company, engaged in manufacturing of cotton yarns. Company started with trading of Cotton Bales, Cotton Seeds and Wash Oil and in 2013 moved to manufacturing of cotton yarns mainly in domestic market and third party exports. Company sell cotton yarns to the traders who further sell it to other Industrial units for weaving and other purposes. Company also sells directly to Industrial units for weaving purpose. Company's manufacturing plant is spread 15381.28 square meters which is well equipped with plant and machinery such as Blow room, Humidification facility, Contamination sorter, Link Conner etc. Company has installed capacity of around 36,00,000 kgs / pa and utilisation is around 75% to 80%. On financial performance front, GHSL has reported total revenues/net profits of Rs. 1.89 cr. / Rs. 0.09 cr. (FY13), Rs. 12.42 cr. / Rs. (0.15) cr. (FY14), Rs. 52.12 cr. / Rs. (0.34) cr. (FY15), Rs. 51.89 cr. / Rs. 0.04 cr. (FY16) and Rs. 52.05 cr. / Rs. 0.15 cr. (FY17). For H1 of the current fiscal ended on 30.09.17 it has posted net profit of Rs.0.17 crore on total revenues of Rs. 26.15 cr. So top-line of company remains steady and increase in bottom-line in last two and half years. The company has reported an average EPS of Rs. 0.02 and an average RoNW of 0.12% for last three fiscals on the basis of equity capital of Rs. 16.75 crore. Issue is priced at a P/BV of 0.9 on the basis of its NAV as on 30.09.17 and at a P/BV of 0.93 on the basis of its post issue NAV of Rs. 10.77. If we annualise latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 49 plus. According to offer documents, peers are trading in range of 6 to 43 P/E. Issue appears agressively priced as per latest earnings. On merchant banker's front, this is 55th mandate from its stable in the past three years and last 10 listings marked openings at a premium of 0.01% to 20% on the day of listings. And one main board IPO Astron Paper listed at 130% premium.  As per financials, company's growth is stable, RoNW is 0.12% for last three fiscals and issue is aggressively priced as per latest earnings. Company is working in textile industry, which is very competitive. Past performances of merchant banker is good and So, we give NEUTRAL rating to this SME IPO.

• 1 Mr Maganlal Parvadiya
• 2 Mr Chandulal Parvadiya