Knowledge Marine & Engineering Works Limited

Incorporated in 2015, Knowledge Marine & Engineering Works Limited is engaged in Owning and operating of Marine crafts for dredging services. The company's Ancillary services - conducting marine hydrographic & magnetometer survey, providing technical manpower solutions for maintenance and operation of vessels and repairs and Maintenance/ Refits of Marine Crafts and Marine Infrastructure. The company, as a KMEW group, operate with other 3 (three) companies formed as a special purpose vehicle (SPV) through joint venture agreement to meet the CPC guideline set by the Government of India for large contracts and to secure them for the group's growth. The company handle the contracts which involves - (1) Repairs, refit and renewals of marine crafts, hiring of tug, survey-cum-pilot launch, barges and other marine vessels (2) Dredging at various ports of India (3) Manning, technical maintenance, operations of marine vessels and (4) Hydrographical and magnetometer surveys The company have entered into agreements with International Seaport Dredging Private Limited, Indian Port Dredging Private Limited, Paradip Port Trust, Solitaire Marine & Offshore Private Limited and Visakhapatnam Port Trust for varied services. The company owns many marine craft such as River craft 1, River craft 2, River craft 3 and River craft 4. On the financial performance front, KMEWL has reported turnover/net profits (loss) of Rs. 10.64 cr. / Rs. 1.43 cr. (FY18), Rs. 10.59 Cr. / Rs. 2.70 Cr. (FY19) and Rs. 24.17 Cr. / Rs. 4.24 Cr in FY20. For upto H1 of FY21, company has posted 16.34 Cr total income and 3.80 Cr net profit. So . For the last three years, company has posted average EPS of Rs. 5.15 and RoNW of 39.82%. The issue is priced at a P/BV of 1.57 based on its NAVs of Rs. 23.61 post issue. As on date of RHP, order-book of company is around 126.64 Cr. As per FY20 earnings, on fully diluted equity post issue, IPO is priced at P/E of around 9. If we annualise latest earnings of FY21 on fully diluted equity, than P/E is around 5. So issue looks very reasonably priced and comparison between peers is shown in above table.  On BRLM's front Hem securities Limited has handled 10 IPOs in last three fiscals. All are opened above price. As of now from 10 IPOs, 3 are trading below issue price and remaining are trading above issue price. For Knowledge Marine & Engineering Works Limited, financial data is good, RoNW is 38.30%, P/E is around 9 for FY20 and 5 for annualised FY21. So issue looks very reasonably priced with strong order book. As new ports are being developed, this industry will have good growth in future. Performance of BRLM is good. So we give SUBSCRIBE rating to this SME IPO, but one should keep in mind risk of SME sector and low volume.

• 1 MR. Saurabh M. Daswani
• 2 MRS. Kanak S. Kewalramani