Krishna Defence and allied Industries Limited was engaged in the diversified business of manufacturing defence application products, dairy equipment products and kitchen equipments. They have entered into various licensing agreement with Defence Research and Development Organisation ('DRDO') for obtaining the know-how and rights which enable them to manufacture and supply specialised defence application products for the Indian Armed Forces. Under defence application, they provide a wide array of high performance products for naval applications and other utilities such as shipbuilding steel bulb bar, special steel alloy bricks used as ballast weight for critical applications, super alloys weld consumables like welding wire, flux and electrodes, food container and improved space heating device, which is also known as bukhari. In 1997, they started company's operations in the dairy equipment manufacturing as a partnership firm, M/s Krishna Industries and over the years company has developed a wide range of dairy equipment products such as stainless steel milk Cans, Milk Cooling Tanks or Bulk Milk Coolers, Milking Machine, Cow Brooming Brush and Robotic Milk Collection Unit. Company's achieved a new milestone in 2015 in the dairy industry after acquiring patent for invention of automated milk analysis and collection apparatus called Robotic Milk Collection Unit (RMCU) upto to the year 2035. The developed product works like a kiosk for Milk Collection for Milk Society, and it analyzes the farmer milk not only for Fat & SNF but also tests the milk for adulteration. In the year 2010, they stretched Company's operations into the business of manufacturing Kitchen Equipment and commenced manufacturing of Bulk Cooking Equipment like Rice Cauldron, Dal Cauldron, Braising Pan, Distribution Vessels, Rice Chute, Dal Storage Tank, which are used by organizations which run Midday Meal Programs where cooking is done for up to 1,00,000 meals a day. Presently they are supplying such products to The Akshaya Patra Foundation. As per financial performance, KDAIL has posted total income/net profits of Rs 58.90 Cr / Rs 2.06 Cr (FY19), Rs 25.72 Cr / Rs 0.74 Cr (FY20), Rs 36.18 Cr / Rs 1.93 Cr (FY21) and Rs 20.98 Cr / Rs 1.22 Cr (H1FY22). So company has shown declining results over last couple of years, but super profits in last 6 months raises some doubts. Company has posted an average EPS of Rs 1.86 and average RoNW of 9.16% for last three fiscals. Issue is priced at a P/B of 1.82 as per NAV of Rs 21.46 on 31.03.21. As per FY21 earnings on fully diluted equity post issue, asking price is at P/E of around 23.06 and as per annualised FY22 earnings P/E is 18.28. As per RHP there are no listed peers. On BRLM's front, HEM Securities Limited Private Limited associated with this SME IPO and handled 13 IPOs in last 3 years. From last 10 IPOs, one opened below issue price and remaining above issue price or at par. As of now from last 10 IPOs, four are trading below and remaining are trading above issue price or at par. ( As on 21.03.22 ) As per financials, KDAIL has shown declining results and sudden rise in net profit in H1 of FY22, RoNW is 20.84% and P/E is respectively 23.06 and 18.28 as per FY21 and annualised FY22 earnings, which looks fully priced. Sudden rise in profit in IPO year and only 6M result for current FY raises concerns. Performance of BRLM is average post listing. So we are giving AVOID rating to this IPO.
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