Started in 2010, Mangalam Global Enterprise Limited is set up by Ahmedabad based Mangalam group. It is mainly engaged in the business of manufacturing of Refined Castor Oil First Stage Grade (F.S.G.), Castor De-Oiled Cake and High Protein Castor De-Oiled Cake for domestic and international markets. Castor oil mainly used in Lubricants, Paints, Sealants, Pharmaceuticals, Inks Cable Insulators, Textiles, and Rubber industries. Apart from this, it also manufactures Delineate Cotton Seeds and Cotton Bales (Lint Cotton). Mangalam Global also involved in the trading business of Raw Cotton and Castor Seeds. Company's one cotton processing unit is located at Harij, Gujarat and two castor processing units located at Harji and Palanpur. Both the units have a capacity of producing 220 MT Castor De-Oiled Cake per day and 225 MT Castor Refined Oil (F.S.G.) per day. They supply their products in states such as Gujrat, Maharashtra, Rajasthan, Delhi, and West Bengal. Also, the company exports products in countries like Thailand and Oman. Farpoint Enterprise LLP (Farpoint) and Hindprakash Castor Derivatives Private Limited (HCDPL) are the two subsidiaries of Mangalam Global with 51% stake. On a standalone basis, for the last three fiscals, MGEL has posted turnover/net profits of Rs. 2.69 cr. / Rs. 0.09 cr. (FY17), Rs. 26.90 cr./ Rs. 0.26 cr. (FY18) and Rs. 330.04 cr. / Rs. 2.17 cr. (FY19). For Q1 of FY20, it has clocked in the net profit of Rs. 1.05 cr. on a turnover of Rs. 145.93 cr. On a consolidated basis, for FY19 it has posted a turnover of Rs. 389.95 cr. with a net profit of Rs. 2.27 cr. For Q1 of FY20, it has earned a net profit of Rs. 1.02 cr. on a turnover of Rs. 146.50 cr. The company is in the high volume low margin business having high competition. Super top and bottom line in pre-IPO and IPO year raise concern. On a consolidated basis, it's manufacturing and trading ratio was 56% and 44% for FY19 and 96% and 4% for Q1 of FY20. For the said periods, exports volume in the total revenues was 0.96% and 3.18% respectively. For the last 39 months on a standalone basis, MGEL has posted an average EPS of Rs. 1.21 and an average RoNW of 23.14%. On a consolidated basis for the FY19 and Q1 of FY20, it has posted an EPS of Rs. 1.42 and Rs. 0.64 respectively. For the said periods on a consolidated basis, it has posted RoNW of 6.62% and 2.89% respectively. The issue is priced at a P/BV of 1.68 on the basis of its consolidated NAV of Rs. 30.41 as on 30.06.19 and at a P/BV of 1.44 on the basis of post-issue NAV of Rs. 35.45. If we annualize consolidated Q1 earnings and attribute it to post issue paid-up equity capital then asking price is at a P/E of 20 plus against the industry average of 22. On BRLM's front, for Pantomath Capital Advisor Private Limited this is the 59th mandate from its stable in the last three fiscals (including the ongoing). Out of the last 10 listings, 1 issue opened at a discount (Suich Ind.) and the rest with premiums ranging from 1.25% to 11.11% on the day of listings. MGEL business model is seasonal and carrying a risk of natural calamities. It carries higher inventory in relation to its total current assets that is worrisome. Following super earnings in pre-IPO and IPO year, the issue appears fully priced. Sustainability of such performance raises concern. Performance of BRLM is good. Considering all these, we give 'NEUTRAL' rating to this SME IPO.
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