Started in 2004, Ahmedabad - Gujarat based Indo US Bio-Tech Limited is engaged in the business of breeding products, processing and marketing of high performing open-pollinated and hybrid agricultural seed varieties & ( seed testing, soil & water testing ). The company has its own laboratory for seed testing at Junagadh. The company started In-House Research and Development (R&D) unit at Modasa, District - Sabarkantha (Gujarat) for research activities to produce better and different varieties of seeds. On September 23, 2011, it got the recognition up to March 31, 2014, for In-House R&D from Government of India, Ministry of Science and Technology, Department of Scientific and Industrial Research Technology Bhavan, New Delhi (DSIR). In the initial stage, the company was engaged in producing different varieties of oil seeds and pulses seeds, later on, it also added vegetable, spices and cereals seeds to its basket. In the year 2014, it shifted its R&D unit Gandhinagar to carry on its research activities. As on January 31, 2018, Indo US Bio-Tech has 45 Employees in various departments. As per financial performance, IUBL has posted total income/net profits of Rs. 14.94 cr. / Rs.0.30 cr. (FY13), 14.86 cr. / Rs.0.26 cr. (FY14), Rs. 19.66 cr. / Rs. 0.50 cr. (FY15), Rs. 19.15 cr. / Rs. 0.36 cr. (FY16) and Rs. 24.58 cr. / Rs. 0.65 cr. (FY17). It suffered a setback in bottom line for FY16. For first seven months of the FY18 it has earned net profit of Rs. 0.74 cr. on a turnover of Rs. 15.89 cr. So, FY18 results which shows higher bottom line looks surprising. For last three fiscals it has posted an average EPS of Rs. 1.57 and an average RoNW of 14.89%. Issue is priced at a P/BV of 2.08 on the basis of post issue NAV of Rs. 24.56. If we annualise latest earnings and attribute it on fully diluted equity post issue then asking price is at a P/E of 19.40. As per offer documents, it is considering Mangalam Seeds, Kaveri Seeds and Nath Bio as its listed peers that are trading at a P/Es of 36, 27 and 39 respectively (as on 19.04.18). In fact based on FY17 earnings it is priced at a P/E of 38 and first seven months super profits raises doubt about its sustainability. Based on FY 17 earnings it is highly priced, but based on FY18 annualised earnings it is priced at a P/E of 19.40 and so looks reasonable. On merchant banker's front, this is the 14th IPO in last three fiscals. Out of last 10 listings, 2 opened at discount to offer price and the rest with a premium ranging from 2.8% to 20% on the day of listing. As per financials, company's performance is not consistent, it has shown decline in top and bottom line in FY16, FY18 results surprisingly higher, RoNW is 14.89% for last three fiscals and issue is fully priced as per FY17 earrings. So we give NEUTRAL rating to this SME IPO as per current market situation.
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