Narmada Agrobase Limited

Started in 2013, Narmada Agrobase Limited is Ahmedabad, Gujarat based company engaged in manufacturing & processing of cottonseed meal cake, cattle feed and soya bean meal. The products manufactured by the company are used for the feeding of cattle which provides a high amount of proteins and other nutrients required by them. Also, the by-products of the Products are used in textiles Industry, Consumer Goods Industry, and Paper Industry. The company manufactures and exports its products under the brand name of 'Churma' and 'Gaay Chhaap Narmada Pashu Aahar'. Narmada Agrobase has 9 employees (including Registered Office Staff and Factory Workmen and Corporate Office) onpayroll and it also hires contract labor in the factories as per requirement. On financial performance front, NAL has posted total income/net profits of Rs. 2.10 cr. / Rs. – (0.02) cr. (FY14), Rs. 22.04 cr. / Rs. 0.14 cr. (FY15), Rs. 30.71 cr. / Rs. 0.19 cr. (FY16) and Rs. 34.45 cr. / Rs. 0.30 cr. (FY17). For the H1 of FY18, it has earned net profit of Rs. 0.21 cr. on a turnover of Rs. 17.40 cr. Thus it has posted gradual increase in top and bottom lines. For last three fiscals, it has posted an average EPS of Rs. 0.78 and an average RoNW of 10.93%. Issue is priced at a P/BV of 1.91 on the basis of its post issue NAV of Rs. 16.78. If we annualise latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 56 making it a exorbitantly priced offer. As per offer documents, it has no listed peers to compare with. On merchant banker's front, this is the 5th mandate from its stable. Last 4 listings opened at a premium ranging from 0.7% to 8.8% on the day of listing. As per financials, company's performance is gradually increasing, RoNW is 10.39% for last three fiscals. Issue is highly priced as per latest earnings. So we give AVOID rating to this SME IPO as per current market situation.

• 1 Mr. Neerajkumar Sureshchandra Agrawal
• 2 Mr. Suresh Chandra Gupta