Shanthala FMCG Products Limited

As per financial performance, Shanthala FMCG Products Limited has posted total income/net profits of Rs 39.55 Cr / Rs 0.14 Cr (FY21), Rs 32.54 Cr / Rs 0.04 Cr (FY22), Rs 40.77 Cr / Rs 0.17 Cr (FY23) and Rs 15.85 Cr / Rs 0.10 Cr (Upto 31.08.23 FY24). So company has shown zigzag results, but sudden rise in net-profit just before IPO, is very surprising. Company has posted an average EPS of Rs 2.55/- and average RoNW of 9.38% for last three fiscals. Issue is priced at a P/BV of 2.84 as per NAV of Rs 32.05/- as on post issue. As per FY22, FY23 and annualised FY24 earnings on fully diluted equity post issue, asking price is at P/E of respectively around 1354.50, 344.36 and 402.33. As per RHP, there is no peers. On BRLM's front, First Overseas Capital Limited is associated with this SME IPO and handled 18 SME IPOs in last 3 years. From last 10 IPO, one opened below issue price and remaining opened at par or above issue price on the listing day. As of now from last 10 IPO, four are trading below issue price and remaining are trading above issue price. ( As on 20.10.23 ) As per financials, Shanthala FMCG Products Limited has shown zigzag results, RoNW is 12.38% and P/E is respectively 1354.50, 344.36 and 402.33 as per FY22, FY23 and annualised FY24 earnings. So, issue looks aggressively priced. Also, sudden rise in net-profit is very surprising. Company is in business of FMCG products distribution, which is highly fragmented and competitive segment. Performance of BRLM is good. So we are giving AVOID rating to this SME IPO. Readers must consult a qualified financial advisor prior to making any actual investment decisions.

• 1  B. Manjunath Mallya
• 2  Shobitha Malya
• 3  Sneha Vinayak Kudva
• 4  Yogish Mallya