Rangoli Tradecomm Limited

Incorporated in 2009, Rangoli Tardecomm Limited is engaged in business of trading of Polymers and Textile products situated at Kolkata, West Bengal. Polymer trading business includes commodity polymer, engineering polymer & chemicals and additives while Textile trading business includes trading of yarns, threads and fabrics. The Company supplies raw material to yarn and fabric manufacturer(s) on credit basis depending on the vendor creditability and procure the same on advance or cash on delivery basis due to which company get cash discount as well as volume benefit. In some cases, Company purchases final product of the same factory and sell it to traders, semi-whole sellers and garment manufacturer. The Company functions on two business models for supplying Polymers and Textile products (1) Business 2 Business model (B2B) and (2) Business to Customer model (B2C)Company has its presence in North India, Delhi, Haryana, Himachal Pradesh, Rajasthan and Punjab & also covering western regions of Gujarat and Maharashtra. On the financial performance front, Rangoli Tradecomm Limited has reported turnover/net profits (loss) of  Rs. 3.52 Cr. / Rs. 2.92 Cr. (FY19) and Rs. 165.43 Cr. / Rs. 2.11 Cr in FY20. For upto H1 of FY21, company has posted 146.83 Cr total income and 10.92 Cr net profit. So sudden jump in net profit just before IPO raises questions as this period was peak of Pandemic lock-down. For the last three years, company has posted average EPS of Rs. 27.71 and RoNW of 18.65%. The issue is priced at a P/BV of 1.83 based on its NAVs of Rs. 113.37 post issue.  As per FY20 earnings on fully diluted equity post issue, IPO is priced at P/E of 81 and if we annualise earnings of FY21, then P/E is 7.81. But if company is able to maintain such high margins in trading business is big concern. So issue looks aggressively priced and comparison between peers is shown in above table. On BRLM's front Fedex Securities Limited has  handled 10 IPOs in last three fiscals. From 10 IPOs, 1 IPO is opened below issue price and remaining are opened above price. As of now from 10 IPOs,  5 are trading below issue price and remaining are trading above issue price. For Rangoli Telecomm Limited, very limited financial data is available, RoNW is 17.59%, P/E is around 81 for FY20 and around 8 for annualised FY21 (due to super earnings in H1). So issue looks very aggressively priced. Also sudden jump in net profit is also raises questions. The polymers and textile products sector has very high competition. Performance of BRLM is poor. So we give AVOID rating to this SME IPO.

• 1 GANADHIP WHOLE SELLER PRIVATE LIMITED
• 2 USHIK GALA AND SUMIT PAL SINGH