Ratnabhumi Developers Limited

Started in 2006, Ratnabhumi Developers Limited is Ahmedabad, Gujarat based company engaged in construction and real estate business. During the period 2009 - 2012, company completed the project namely: Ratna- TURQUOISE costing Rs 65.63 Crores. During the period 2012-17, company's main business activities were selling and marketing of its commercial offices and shops constructed in its project - Turquoise. Apart from selling and marketing of its commercials offices and shops, company has rented its shops, offices and spaces in its Project. Company's Business Verticals can be segregated in the following manner:1. Revenue from Commercial Projects2. Rental Income3. Trading in Plot of Land4. Investment/Trading in Residential scheme RDL's completed project includes "Ratna TURQUOISE" and ongoing project includes "RATNA ARTEMUS II" and "RATNA". On performance front, RDL has posted turnover/net profits of Rs. 6.34 cr. / Rs. 1.21 cr. (FY13), Rs. 6.30 cr. / Rs. 0.31 cr. (FY14), Rs. 7.56 cr. / Rs. 1.09 cr. (FY15), Rs. 7.76 cr. / Rs. 1.59 cr. (FY16) and Rs. 9.81 cr. / Rs. 1.35 cr. (FY17). For Q1 of FY18 it has earned net profit of Rs. 0.07 cr. on a turnover of Rs. 0.18 cr, which consists only rental income. Thus financials shows inconsistency in bottom line. Issue is priced at a P/BV of 2.57 based on its post issue NAV. For last three fiscals it has reported an average EPS of Rs. 27.71 on share capital of Rs 50 lacs and average RoNW of 15.19%. If we consider the FY17 earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 64 against peers are trading at average of 35 plus. So issue appears aggressively priced. On merchant banker’s front, this is the 2nd mandate from its stable so far. Last SME IPO of Shish Industries Limited,  opened with a premium of approx 7% and currently trading at discount of issue price. As per financials, company's growth is normal with inconsistency in bottom line, RoNW is 15.19% for last three fiscals and issue is aggressively priced as per last FY earnings. We give AVOID rating to this SME IPO.

• 1 Mr. Kaivan Shah
• 2 Mr. Meghna Shah