Kahan Packaging Limited

As per financial performance Kahan Packaging Limited has posted total income/net profits of Rs 12.12 Cr / Rs 0.01 Cr (FY21) and Rs 15.90 Cr / Rs 0.19 Cr (FY22) and Rs 17.55 Cr / Rs 1.03 Cr (FY23), So company has shown good results, but sudden rise in bottom-line before IPO is very surprising. Company has posted an average EPS of Rs 5.86/- and average RoNW of 39.90% for last three fiscals. Issue is priced at a P/BV of 2.56 as per NAV of Rs 31.21/- as on post issue. As per FY22 earnings on fully diluted equity post issue, asking price is at P/E of around 110.46 and as per FY23 earnings P/E is 21.06. As per RHP, comparison between peers is shown in above table. On BRLM's front, Hem Securities Limited is associated with this SME IPO and handled 26 SME IPOs in last 3 years. From last 10 IPOs, all are opened above issue price on the listing day. As of now from last 10 IPOs, all are trading above issue price. ( As on 04.09.23 ) As per financials, Kahan Packaging Limited has shown good results, RoNW is 58.79% and P/E is respectively 110.46 and 21.06 as per FY22 and FY23 earnings. As per FY22 earnings issue looks aggressively priced and as per FY23 earnings issue looks fully priced. So sudden rise in net profit is very surprising. Company is in business of providing bulk packaging solutions to business-to-business ("B2B") manufacturers, which is highly fragmented and competitive segment. Also issue expenses are around 15% of issue size, which is very high for such small SME IPO. Performance of BRLM is very good. So we are giving AVOID rating to this SME IPO. Readers must consult a qualified financial advisor prior to making any actual investment decisions.

• 1  Prashant Jitendra Dholakia
• 2 Rohit Jitendra Dholakia