Indong Tea Company Limited

Indong Tea Company Limited incorporated in the year 1990, owns and operates a Tea Garden under Government lease and is engaged in Tea Plantation & Manufacturing of CTC Tea at Indong Tea Estate situated at Jalpaiguri District of West Bengal. The Indong Tea Estate is spread over an area of 740.38 Hectares which comprises of Tea Plantation, Tea Factory, Withering TroughHouse, Officer's Bunglows, Staff Quarters, Labour Quarters, Pump House, General Stores, Dairy Farm etc. Company has employed approximately 1346 employees at various levels of the Organization including temporary labour.   As per financial performance, Indong tea company Limited has posted total income/net profits of Rs 16.97 Cr / Rs (1.21) Cr (FY20), Rs 23.13 Cr / Rs 1.27 Cr (FY21), Rs 19.92 Cr / Rs 1.31 Cr (FY22) and Rs 13.24 Cr / Rs 2.04 Cr (upto H1 FY23). So company has shown average results, but shown very high net profits in current year. Company has posted an average EPS of Rs 1.5 and average RoNW of 2.54% for last three fiscals. Issue is priced at a P/B of 1.65 as per NAV of Rs 15.79 post issue. As per FY22 earnings on fully diluted equity post issue, asking price is at P/E of around 29.63 and as per annualised FY23 earnings P/E is 9.53. As per RHP, comparison between listed peers are in above table. On BRLM's front, Finshore Management Services Limited associated with this SME IPO and handled 32 SME IPOs in last 5 years. From last 10 SME IPOs, 2 opened below issue price and remaining opened above issue price or at per on the listing day. As of now from last 10 IPOs, four are trading below and remaining are trading above issue price or at par. ( As on 07.02.2023 ) As per financials Indong Tea Company Limited has shown average results, RoNW is 15.24% and P/E is respectively 29.63 and 9.53 as per FY22 and annualised FY23 earnings, which looks very cheaply priced. Company has shown exceptional results in IPO year and it may be difficult to maintain same margins in future. Company is in business of Tea, which is highly competitive and fragmented. Performance of BRLM is average. So we are giving AVOID rating to this IPO.

• 1   Mr. Hariram Garg                      
• 2   Mr. Madanlal Garg
• 3   M/S. Asian Tea and Exports Limited