Madhav Copper Limited FPO

Started in 2012, Gujarat based Madhav Copper Ltd (MCL) is engaged in the manufacturing and supply of copper bus bars, copper rods, strips, anodes, sections, enamelled copper wire, and poly wrap submersible winding wire. The copper material produced by the company is used in mechanical and electrical fields for power distribution, generation, transmission and electronic industries. The company also offers services to assist electrical winding designers in overcoming electrical equipment short-circuit problems and winding making. Madhav Copper Ltd follows the National and International standards such as IES, BS, JIS, NEMA, and ASTM. The manufacturing unit of MCL is situated at Bhavnagar, Gujarat. The company was listed on NSE Emerge in 2017 to raise funds for working capital requirements and improve brand image. Currently, the company has an Indian Railway project to supply copper products of various sizes and specifications. As on September 30, 2019, company has 46 employees, who look after day to day business operations, administrative, secretarial, legal, HR, purchase & procurement, production, quality assurance and quality control, marketing and accounting functions in accordance with their respective designated goals. For the last three fiscals, MCL has posted turnover/net profits of Rs. 71.63 cr. / Rs. 0.86 cr. (FY17), Rs. 169.11 cr. / Rs. 1.96 cr. (FY18) and Rs. 213.05 cr./ Rs. 4.21 cr. (FY19). For H1 of FY20, it has clocked in the net profit of Rs. 2.60 cr. on a turnover of Rs. 94.34 cr. So company has shown good growth in last three fiscals. For last 3 fiscals, MCL has posted an average EPS of Rs. 1.18 and average RoNW of 25.40% respectively. The issue is priced at a P/BV of 15.96 on the basis of its NAV of Rs. 6.39 on 30.09.19. If we annualise H1 FY20 earnings and attribute it to post issue paid-up equity capital then asking price is at a P/E of around 53. As per FY19 earnings, P/E is around 66. So issue looks fully priced. Comparison between peers is shown in above table. On BRLM's front for Pantomath Capital Advisors Private Limited, this is the 60th IPO in the last three fiscals (including the ongoing). Out of last ten listing, one opened at discount or par and the rest with premiums ranging from 0.03% to 20% on the day of listings. As of now from last 10 IPOs, 7 are trading below issue price and remaining above or near issue price. ( As on 23.01.2020 ) Company has good growth in financials, RoNW is 32.04% and issue looks fully priced as per FY19 earnings. This industry has very tough competition from listed or local players. Performance of BRLM is poor. CMP of MCL is 121 which is around 20% higher than FPO price. Considering all these, we give 'NEUTRAL' rating to this SME IPO.

• 1 Mr. Nilesh Patel
• 2 Mr. Rohit Chauhan
• 3 Mr. Divya Monpara