S. M. Gold Limited

Started in 2017, S. M. Gold Limited is Ahmedabad - Gujarat based company, engaged in the business of manufacturing and wholesale trading of mangalsutra jewellery. Besides mangalsutra jewellery, a minor part of business also includes other jewellery's like Rings, Chain, Earrings, Ear Chain, Nose-rings/Nose pins, waist belts, Anklet, Zuda, Toe Ring, Pendant Set/Pendant, Bracelet and Bangles., wedding Jewellery, festive Jewellery. Company manufactures jewellery at its manufacturing unit located at Manek Chowk. Apart from manufacturing jewellery, company also gets  mangalsutra and other jewellery's manufactured through job work. The jewellery sold by them is sold under the brand name of "S. M. Gold – the House of Mangalsutra". The major raw material used for making the mangalsutra and other jewellery's is gold, black pearls, stones, kundan etc. Company sources gold bar from bullion market & local markets in Ahmedabad. Black pearls and other raw material is sourced from local market of Ahmedabad and from Jaipur. The company has 9 employees. As per financial performance, S. M. Gold has posted total income/net profits of Rs. 19.55 cr. / Rs. 0.21 cr. (FY15), Rs. 23.82 cr. / Rs. 0.17 cr. (FY16), Rs. 22.79 cr. / Rs. 0.18 cr. (FY17) and Rs. 13.54 cr. / Rs. 0.18 cr. (FY18). For Q1 of FY19, company post net profit of 0.22 Cr on total revenue of 4.90 Cr. So company has poor financials and almost static bottom-line till FY18 and in Q1 of FY19, it has posted net profit more than FY18 which looks very surprising. Trade receivables stands near to 33% of total revenue in FY18. Although financials from FY15 is given, but average EPS and RoNW is not given for last three fiscals. Issue is priced at a P/BV of 1.55 on the basis of NAV of Rs. 19.30 post issue. If we consider latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 23 and as per RHP industry average P/E is 89.8. With this valuations and sudden jump in profit issue looks very expensive. On BRLM's front, for Beeline Broking Limited this is the 21th IPO in last 5 years. For last 10 IPO, 7 opened below issue price and rest above issue price with 1% to 25% gains. Currently from last 10 IPOs, 7 are trading below issue price and 3 above issue price. ( As on 28.09.18 ) As per financials, Company's performance is very poor, RoNW is 5.20% and issue looks very expensive. Also performance of Q1 FY19 generates doubts and Performance of BRLM is poor. So we give AVOID rating to this SME IPO.

• 1 Mr. Priyank S. Shah
• 2 Mr. Pulkitkumar S. Shah