Shelter Pharma Limited

As per financial performance Shelter Pharma Limited has posted total income/net profits of Rs 22.49 Cr / Rs (0.24) Cr (FY21), Rs 30.06 Cr / Rs 2.51 Cr (FY22) and Rs 36.15 Cr / Rs 7.88 Cr (FY23), So company has shown good growth, but sudden growth in net profit just before IPO raises doubts. Company has posted an average EPS of Rs 15.54/- and average RoNW of 26.23% for last three fiscals. As per FY22 earnings on fully diluted equity post issue, asking price is at P/E of around 26.43 and as per FY23 earnings P/E is 8.4. As per RHP, comparison between listed peers is shown in above table, but showing such big companies as peers very surprising. On BRLM's front, Gretex Corporate Services Limited is associated with this SME IPO and handled 15 SME IPOs in last 3 years. From last 10 IPOs, two opened below issue price and remaining opened above issue price on the listing day. As of now from last 10 IPOs, one is trading below issue price and remaining are trading above issue price. ( As on 09.08.23 ) As per financials, Shelter Pharma Limited has shown good results, RoNW is 39.86% and P/E is respectively 26.43 and 8.4 as per FY22 and FY23 earnings. As per FY22 earnings. issue looks fully priced and as per FY23 earnings, issue looks reasonably priced. But sudden rise in net profit just before IPO raises doubts and sustainability of such margins in future will be very difficult. Company is in business of manufacturing herbal products for Human and Veterinary, which is a highly fragmented and competitive. 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 Mr. Mustaqim Nisarahmed Sabugar
• 2  Mr. Shakil Nisarahmed Sabugar