Started in 2018, RO Jewels is engaged in the wholesale business of Silver and Gold chains. It is an Ahmedabad based business to sell gold/silver necklaces, bars, bracelets, and chains. RO Jewels acquired M/s Ravi Ornaments dated 18th Dec 2019. The company purchases the readymade jewelry from the independent wholesalers and manufacturers across Mumbai and Ahmedabad. It has a showroom at Manek Chowk, Ahmedabad to sell the products. Apart from this, the company also sells products to other jewelry stores through B2B marketing strategy. The Jewelry portfolio of the company includes Indo-western, traditional, and modern jewelry. All the jewelry offered by RO Jewels has BIS Hallmark (widely accepted mark of purity of gold). For the last three fiscals, as per restated financial data, ROJL has posted turnover/net profits of Rs. 5.74 cr. / Rs. 0.06 cr. (FY17), Rs. 9.76 cr. / Rs. 0.07 cr. (FY18) and Rs. 4.24 cr., / Rs. 0.01 cr. (FY19). Thus it has shown inconstancy in the top and bottom lines. For the first half of FY20, it has earned a net profit of Rs. 0.15 cr. on a turnover of Rs. 10.47 cr. There appears to be window dressing in the IPO year. However, according to offer documents, an amalgamation of Ravi Ornaments with the newly formed limited company i.e. ROJL has transpired boosts in the top and bottom lines. FY17 and FY18 financial data related to Ravi Ornaments only and thereafter it is for ROJL. ROJL has posted an EPS of Rs. 2.51 for FY19 and Rs. 1.03 (not annualised) for H1FY20. It has posted RoNW of 1.38% and 2.91% for the said periods respectively. The issue is priced at a P/BV of 1.02 based on its NAV of Rs. 35.21 as on 30.09.19 and at a P/BV of 1.03 based on post-issue NAV of Rs. 35.06. If we annualise latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 34 against industry composite of 40 P/E, making it a fully priced issue based on super earnings for H1 FY20. Sustainability of such performance appears remote as the company is in a highly competitive segment with organised/unorganised players around. Comparison between listed players shown in above table. On BRLM's front, for First Overseas Capital Limited this is the 14th IPO and from last 10 IPOs, six opened around or above issue price with 0% to 20% premium on the day of listing. As of now, from last 10 IPOs, 7 are trading below issue price and remaining above or at par issue price. ( As on 11.03.20 ) Company has shown average results and issue is priced at P/E of around 34 as per annualised FY20 super earnings, which looks fully priced. The sector is highly competitive with organised and unorganised players. The performance of BRLM is not good, So we give AVOID rating to this SME IPO.
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