Started in 2012, Penta Gold Ltd is engaged in wholesale distribution of jewelry, precious stones and metals, costume jewelry, watches, clocks, and silverware. They have a retail outlet in Mumbai. PGL export products (gold jewellery studded with diamond) to overseas buyers and also sells to wholesalers domestically. The company primarily sells gold jewellery i.e. Chains, Rings, Bangles, Necklace, Mangalsutra, Bracelet, Earrings and other jewellery studded or non-studded with pearls, diamonds, American diamonds and other precious stones. Further, it also has product line of antique and kundan Jewellery and variety of Italian jewellery products which is famous for its machine designs and light weighted jewellery. PGL majorly procures required gold from various banks and also procures gold and precious stones from local markets. Penta Gold also exports products (gold jewellery studded with diamond) to overseas buyers in USA and UAE. Exports constituted more than 30.49%, 22.23% and 22.81% of its business for the 6 months period ended September 30, 2017; FY 2015-16 and FY 2016-17 respectively. This company has earlier tried to generate fund via IPO in September 2017, but IPO was withdrawn and at that time we have given AVOID rating to this IPO. they="" also="" customize="" jewellery="" for="" individual="" needs.="" they="" outsource="" manufacture="" of="" to="" various="" domestic="" corporate,="" local="" artisans="" and="" craftsmen.="" supply="" raw="" material="" the="" job="" workers="" who="" in="" turn="" take="" 7="" 10="" days="" manufacturing="" depending="" upon="" size="" design="" order.="" On financial performance front, for last four fiscals PGL has posted turnover/net profits of Rs. 274.31 cr. / Rs. 0.57 cr. (FY13), Rs. 838.26 cr. / Rs. 1.38 cr. (FY14), Rs. 250.02 cr. / Rs. 1.58 cr. (FY15), Rs. 244.92 cr. / Rs. 1.78 cr. (FY16) and Rs. 237.58 cr. / Rs. 1.69 cr. (FY17). Its working for FY 14 posted very high top line with no related rise in bottom line. For H1 of FY18 company has posted net profit of 1.31 cr on total income of 110.48 cr, which is very surprising. For last three fiscals it has posted an average EPS of Rs. 1.92 and RoNW of 11.96%. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of 18 plus and at a P/BV of 1.62 on post issue NAV. Peers are trading in the range of 18 to 66 P/Es with industry average of 52. Thus issue appears to have been fully priced as per latest earnings. on="" merchant="" banker’s="" front,="" this="" is="" 7th="" mandate="" from="" its="" stable="" and="" out="" of="" last="" 6="" listings,="" 4="" closed="" below="" the="" offer="" price="" two="" with="" a="" marginal="" premium="" 1%="" on="" day="" listing="" (as="" per="" documents).="" As per financials, company's top-line and bottom-line are almost stable or lower side in last three fiscals, RoNW is 11.96% for last three fiscals and issue is priced fully as per latest earnings. But sudden increase in bottom line for H1 of FY18 raises concerns. So we give AVOID rating to this SME IPO.
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