Started in 2010, Sanghvi Brands Ltd (SBL) manages and operates Luxury Spa, Beauty, Wellness & Fitness Brands and one of the top largest Spa and Wellness Operator in India with license rights to operate various premium international brands including Spa by Clarins, Spa by L'Occitane, Elle Spas & Salons, Warren Tricomi Salon & Spa, Levo, Rosanno Ferretti, TAOS Salon, Ramona Braganza's 3-2-1 Fitness programme. They also holds sole distributorship of Noveau Lashes for the territory of India to promote market and sell these products. They currently operates 19 Spa/Salons across the globe and another 9 Salons/Spa are under development. It has partnered with The Ritz Carlton San Fransisco, JW Marriot Mussoorie, Raichak Hotel in Kolkata, Khyber Resorts in Himalayas, Jammu & Kashmir, realty developers Lodha, IREO, K Raheja Corp etc. On performance front, SBL has reported turnover/net profits (loss) of Rs. 1.57 cr. / Rs. - (0.42) cr. (FY13), Rs. 5.58 cr. / Rs. - (0.09) cr. (FY14), Rs. 9.96 cr. / Rs. 0.08 cr. (FY15), Rs. 15.06 cr. / Rs. - (0.86) cr. (FY16) and Rs. 26.70 cr. / Rs. 0.12 cr. (FY17). For Q1 of current fiscal it has posted net loss of Rs. 0.28 cr. on a turnover of Rs. 6.70 crore. For last thee fiscals it has reported average EPS of Rs. - (0.31) and average RoNW of - (2.65)% on consolidated basis while on standalone basis it has reported average EPS of Rs. 0.59 and average RoNW of 4.48%. Asking price is at a P/BV of around 2.4 on the basis of post issue NAV of its shares. If we calculated P/E based on fully diluted equity post issue and FY17 earnings, then issue is priced at a P/E of around 618. There is no listed peers as per DRHP. Issue is very highly priced and company is making losses consistently. On merchant banker's front, this is the 35th mandate (including 1 main board IPO of Salasar) from its stable so far. Out of last 10 listings, 2 IPOs opened at discount, one at par and the balance 7 with a premium ranging from 3% to 131% premium on offer price on the day of listing. 131% rewards were from its main line IPO. As per financials, company's growth in top-line is good, but same is not being reflated in bottom-line, RoNW is 1.44% for last three fiscals and issue is very highly priced at P/E of 618. So we give AVOID rating to this SME IPO.
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