Pritika Engineering Components Limited

Pritika Enggineering Component Limited caters to the tractor industry in the automotive sector with major dependency on Original Equipment Manufacturers. They supply their product directly to OEM and through their promoter company Pritika Auto Industries Limited and group company Pritika Industries Limited. They are engaged in the business of manufacturing of precision machined components primarily for automotive industry, especially for tractors, trucks, and other commercial vehicles, etc. Company manufactures various Tractors & Automobile components like End Cover, Cover Sealed Brake, Differential Case, Cover Hydraulic Lift, Cover Transcase, Front Wheel hub, Fly Wheel Housing, Rear Axle Casings,Hydraulic Lift Covers, Brake Housing & Front Engine Supports etc. In FY22, they manufactured 6619 MT with an installed capacity of 12000 MT. In FY20, FY21 & FY22, company's utilized capacity was 41%, 44% & 55% respectively, which shows a huge potential for growth in business. As on 31st March, 2022, company has 388 employees. As per financial performance, PECL has posted total income/net profits of Rs 21.72 Cr / Rs 0.14 Cr (FY20), Rs 32.44 Cr / Rs 0.38 Cr (FY21), Rs 57.39 Cr / Rs 5.46 Cr (FY22) and Rs 43.40 Cr / Rs 1.86 Cr (6M FY23). So company has shown growth, but sudden rise in FY22 net profit surprising and can be seen as make over before IPO. Company has posted an average EPS of Rs 3.82 and average RoNW of 17.96% for last three fiscals. Also company has high debt. Issue is priced at a P/B of 1.14 as per NAV of Rs 25.5 post issue. As per FY22 earnings on fully diluted equity post issue, asking price is at P/E of around 8.08 and as per annualised FY23 earnings P/E is 8.51, which looks very attractive, but sustainability of margin is big question. As per RHP there are no listed peers.     On BRLM's front, GYR Capital Advisors Private Limited associated with this SME IPO and handled 7 IPOs in last 3 years. From last 7 IPOs, all opened above issue price. As of now from last 7 IPOs, four are trading below and remaining are trading above issue price or at par. ( As on 22.11.22 ) As per financials, PECL has shown good growth, RoNW is 33.05% and P/E is respectively 8.08 and 8.51 as per FY22 and annualised FY23 earnings, which looks attractively priced, but sudden rise in profit in FY22 very surprising and creates doubts. Performance of BRLM is poor post listing and nearly 20% IPO amount for issue expenses, that also generates questions. So we are giving AVOID rating to this IPO.

• 1 Mr. Harpreet Singh Nibber
• 2 Mr. Raminder Singh Nibber