Shigan Quantum Technologies Limited

Shigan Quantum Technologies Limited is engaged in the business of designing, developing and manufacturing of varieties of Alternate Fuel Systems including CNG, LNG and Hydrogen Fuel Kit systems for OEMS and others. They manufacture Alternate Fuel Systems for heavy duty vehicles, light duty vehicles and off- highway applications. Since April 2020, Company has also ventured into manufacturing of Fire Detection & Alarm System and Fire Detection & Suppression System. The Company source their critical technologies from MNC companies with whom they have long term technology user agreement or manufacturing license. They have entered into technology agreements with companies for developing exclusive products customised to company requirements. They have got exclusive manufacturing rights in India for these products after their development. Such Gaseous Fuel Injection Technology systems will enable them to manufacture products that will meet the upcoming Emission norms thereby enhancing the performance of the vehicle. Company imports its raw materials from countries like Singapore, USA, Chicago, Mexico, Switzerland, China, Hong Kong, UAE, Italy, France, etc. They also procure their raw materials from domestic suppliers located in Pune, Gurugram, Ghaziabad, Bangalore and other domestic market in India. They export certain components of CNG Fuel Systems to countries like New Jersey, Australia, Italy, Sweden, Canada.. As per financial performance, SQT has posted total income/net profits of Rs 69.08 Cr / Rs 2.66 Cr (FY19), Rs 72.78 Cr / Rs 2.92 Cr (FY20), Rs 96.02 Cr / Rs 3.51Cr (FY21) and Rs 64.39 Cr / Rs 2.89 Cr (5MFY22). So company has shown average results over last couple of years and sudden rise in current year very surprising. Company has posted an average EPS of Rs 2.62 and average RoNW of 23.12% for last three fiscals. Issue is priced at a P/B of 2.03 as per NAV of Rs 24.66 post issue. As per FY21 earnings on fully diluted equity post issue, asking price is at P/E of around 24.50 and as per annualised FY22 earnings P/E is 12.40. As per RHP there are no listed peers.     On BRLM's front, Finshore Management Services Limited associated with this SME IPO and handled 21 IPOs in last 3 years. From last 10 IPOs, Two opened below issue price and remaining above issue price or at par. As of now from last 10 IPOs, eight are trading below and remaining are trading above issue price or at par. ( As on 23.02.22 ) As per financials, SQT has shown average results, RoNW is 20.84% and P/E is respectively 24.50 and 12.40 as per FY21 and annualised FY22 earnings, which looks fairly priced, but sudden rise in profit in IPO year and only 5M result for current FY raises concerns. Performance of BRLM is poor post listing. So we are giving AVOID rating to this IPO.

• 1 Mr. Shishir Agrawal
• 2 Mr. Gagan Agrawal
• 3 Shigan Autotronics Private Limited
• 4 SA Shigan Trust
• 5 GA Shigan Trust