Karnika Industries Limited

As per financial performance, Karnika Industries Limited has posted total income/net profits of Rs 47.79 Cr / Rs 0.81 Cr (FY21), Rs 98.92 Cr / Rs 4.54 Cr (FY22) and Rs 132.43 Cr / Rs 8.52 Cr (FY23), So company has shown good growth, but sudden rise in bottom-line before IPO is very surprising. Also trade receivables is around 30.36% of FY23 total earnings, which is very high. Company has posted an average EPS of Rs 4.72/- and average RoNW of 23.46% for last three fiscals. Issue is priced at a P/BV of 2.21 as per NAV of Rs 34.39/- as on post issue. As per FY22 earnings on fully diluted equity post issue, asking price is at P/E of around 20.76 and as per FY23 earnings P/E is 11.06. As per RHP, comparison between peers is shown in above table. On BRLM's front, Beeline Capital Advisors Private Limited is associated with this SME IPO and handled 17 SME IPOs in last 2 years. From last 10 IPO, all opened above issue price or at par on the listing day. As of now from last 10 IPO, one is trading below issue price and remaining are trading above issue price. ( As on 29.09.23 ) As per financials, Karnika Industries Limited has shown good results, RoNW is 45.76% and P/E is respectively 20.76 and 11.06 as per FY22 and FY23 earnings. So, issue looks fairly priced. But sudden rise in net profit and higher value of trade receivables are very surprising. Company is in business of trading and marketing of kids' wear that is procured on a job-work basis from a third party, which is highly fragmented and competitive segment. Performance of BRLM is good. So we are giving NEUTRAL rating to this SME IPO. Readers must consult a qualified financial advisor prior to making any actual investment decisions.

• 1  Mr. Niranjan Mundhra
• 2  Mr. Shiv Shankar Mundhra
• 3  Mr. Mahesh Kumar Mundhra