Mahickra Chemicals Limited

Started in 1994, Ahmedabad - Gujarat based Mahickra Chemicals Limited is engaged in the business of manufacturing and trading of Reactive Dyes. The company manufactures 40 various types of Reactive Dyes. The products of the company cater to textiles & garments manufacturers. It also offers specialty performance chemicals to the Textile Dyeing and printing industry. Mahickra has a production capacity of approx. 900 tons per annum. The manufacturing facility of the company is situated at Vatva GIDC in Gujarat. The facility is spread over 2 storeyed 700 sq. meters in area. It is an ISO 9001:2015, ISO 14001:2015 and GOTS certified company. The company had 18 employees on its payroll as on 31st January 2018. As per financial performance, MCL has posted total income/net profits of Rs. 43.56 cr. / Rs. 0.17 cr. (FY14), Rs. 43.56 cr. / Rs. 0.17 cr. (FY14), Rs. 42.75 cr. / Rs. 0.09 cr. (FY15), Rs. 34.79 cr. / Rs. 0.15 cr. (FY16) and Rs. 42.26 cr. / Rs. 0.35 cr. (FY17). For the current fiscal it has shown two breaking periods of performance from 01.04.17 to 12.11.17 and from 13.11.17 to 31.12.17. If we combined both then it has earned net profit of Rs. 0.36 cr. on a turnover of Rs. 40.90 crore for first nine months. It suffered a setback in top line for FY 16 and then sudden jump in bottom line for FY 17 is surprising. Except FY16, its top line remained mostly static between FY14 and FY17. For last three fiscals it has posted an average EPS of Rs. 0.73 and an average RoNW of 11.62%. Issue is priced at a P/BV of 1.88 based on its NAV of Rs. 13.27 as on 31.12.17. If we annualise latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 38 against industry average of 27. Thus issue is priced very aggressively. Its listed peers are trading at a P/E of around Akshar Chem (14), Kiri Ind. (12), Camex (34) and Meghmani Orga (31) – (as on 05.04.18 closing on BSE). On merchant banker's front, this is the 68th IPO since fiscal 2015-16. Out of last 10 listings (including that of Benara Bearings) 1 opened at a discount and the 8 at a premium ranging from 1.6% to 20% on SME platform and 1 at a premium of 130% on main board on the day of listing. As per financials, company's performance is almost static except FY16, RoNW is 11.62% for last three fiscals and issue is aggressively priced as per latest earnings. So we give AVOID rating to this SME IPO as per current market situation.

• 1 Mr. Miteshkumar Champaklal Gandhi
• 2 Mr. Ashishkumar Champaklal Gandhi
• 3 Mrs. Komal Mitesh Gandhi