Polysil Irrigation Systems Limited is engaged in manufacturing and sale of micro irrigation system, consisting of drip irrigation system and sprinkler irrigation system, its components, accessories, including irrigation accessories and allied products. Drip irrigation systems are used primarily for irrigating new crops such as vegetables, flowers, fruits, plantation crop, etc., while the sprinkler irrigation system is used primarily for irrigating broadcast crops such as cereals, oilseeds, etc. As a manufacturer and seller of drip and sprinkler irrigation system the product range includes HDPE Pipes, pipe fittings and irrigation equipment’s, including disc filters, screen filters, hydro-cyclone filters, sand filters (gravel), compression fittings, valves (electrical and mechanicals), fertilizer tanks, Digital Controllers, Pressure Gauges, etc. They sell these products under the brand 'Polysil'. The existing manufacturing unit is spread around 100,000 sq. ft. area is situated at Village Rania, Taluka. Savli, Dist. Vadodara Manjusar, Vadodara, Gujarat is equipped with requisite plant and machineries and other facilities. They sell the products through institution markets and open market sale. Under the open market sale, they sell the products through distributors and dealers, who then resell the products to customers i.e. farmers. As of August 15, 2023, they sold the products through 9 distributors and around 425 dealers in India. The end customers are eligible to receive government subsidy, the process for disbursal of such subsidy is managed by the distributor / dealers and/or the customers. They operate in the state of Gujarat, Tamil Nadu, Maharashtra, Andhra Pradesh, Karnataka, Madhya Pradesh, Uttar Pradesh, Rajasthan and Haryana. They operate in the State of Maharashtra, Madhya Pradesh and Rajasthan through the dealer / distributor network and in the State of Andhra Pradesh, Gujarat, Tamil Nadu, Haryana and Uttar Pradesh under institutional model. The basic raw material includes HDPE, LLDPE and LDPE granules and they procure the raw materials based on market availability, pricing and quality from the domestic market and also from international market. The cost of materials consumed (including purchase of stock in trade) by them in the operations accounted for 46.45%, 37.29% and 34.55% of the revenue from operations for the Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively. As per financial performance, Polysil Irrigation Systems Limited has posted total income / net profits of Rs 54.72 Cr / Rs 0.65 Cr (FY21), Rs 37.67 Cr / Rs 0.34 Cr (FY22), Rs 43.93 Cr / Rs 1.14 Cr (FY23) and Rs 10.20 Cr / Rs 1.10 Cr (upto 15.08.2023 FY24). So as per previous financials data, company has shown zig-zag results. Also, trade receivables are around 64% of FY23 revenue and sudden rise in net-profit just before IPO is very surprising. Company has posted an average EPS of Rs 0.80 and average RoNW of 5.32% for last three fiscals. Issue is priced at a P/BV of 2.53 as per NAV of 21.32 as on post issue. If we attribute latest earnings of FY22, FY23 and annualised FY24 on fully diluted equity post issue, then asking price is at a P/E of around 181.19, 53.96 and 20.82 respectively, which looks aggressively priced. As per RHP, comparison between listed peers is shown in above table. On BRLM's front, Fedex Securities Private Limited is associated with this SME IPO and handled 23 SME IPOs in last 4 year. From last 10 SME IPOs, two opened below issue price and remaining opened above issue price or at par on the day of listing. As of now from last 10 IPOs, three are trading below issue price and remaining are trading above issue price.( As on 06.02.24 ) As per financials, Polysil Irrigation Systems Limited has shown zig-zag results, RoNW is 7.39% and P/E is respectively 181.19, 53.96 and 20.82 as per FY22, FY23 and annualised FY24 earnings. So, issue looks aggressively priced and trade receivables are very high. Company is engaged in manufacturing and sale of irrigation system, which is highly competitive and fragmented segment. Performance of BRLM is good. So, we give AVOID rating for this IPO. Readers must consult a qualified financial advisor prior to making any actual investment decisions.
✍️ Post a Comment