Started in 2002, Shiv Aum Steels Limited (SASL) is a trader, distributor, and stockist of mild steel (contains approximately 0.05-0.25% carbon) products. It is an authorized distributor of products from Jindal Steel & Power Limited (JSPL). SASL has entered into MoU with Rashtriya Ispat Nigam Limited (RINL) & Steel Authority of India (SAIL) to procure steel products. Besides this, the company procures the products of Vandana Ispat Limited, Monnet Ispat & Energy Limited and other manufacturers as well. Shiv Aum Steels deals with various steel products like Plates, T - Angles, C Channels, I - Beams, Coils, H - Beams, TMT Bars, Columns and Rails in all sizes based on customer's requirements. Initially, M/s. Salasar Exteriors was a sole proprietorship concern managed by Mr Shreekishan Joshi. The company follows the indirect sales model where it plays a connecting role between steel manufacturers and end-users. Currently, SASL is focussing on domestic markets only and supplies the products to small steel processing units, infrastructure & real estate developers and large EPC companies. The godown of the company is situated in Panvel, Raigad district, Maharashtra. The estimated capacity of godowns is 10,000 - 12,000 tons for flat steel products and 7,000 - 8,000 tons for long steel products. On the financial performance front, for the last three fiscals, SASL has posted turnover/net profits of Rs. 249.00 cr. / Rs. 2.93 cr. (FY17), Rs. 277.89 cr. / Rs. 5.46 cr. (FY18) and Rs. 377.29 cr. / Rs. 5.72 cr. cr. (FY19). For the last three fiscals, it has posted an average EPS of Rs. 5.17 and an average RoNW of 11.97%. The issue is priced at a P/BV of 0.94 on the basis of its NAV of Rs. 46.63 as on 31.03.19 and at a P/BV of 0.96 on the basis of post-issue NAV of Rs. 45.93. If we attribute FY19 earnings on fully diluted equity post issue then asking price is at a P/E of around 10.5 against the industry average of 41. SASL is operating at net margins of below 2% as can be seen from the above financial data. As per offer documents it has considered SRU Steels as its listed peers. SRU is currently trading at a P/E of around 51 (as on 17.09.19 closing). However, they are not strictly comparable on an apple to apple basis. On merchant banker's front, this is the 34th mandate from its stable in the last three fiscals (including the ongoing fiscal). Out of the last 10 listings, 2 opened at discount and the rest with a premium ranging from 0.09% to 1.92%. Thus it has poor track records so far. Although issue appears reasonably priced, considering the poor track record of the merchant banker and the slowdown faced by the steel sector, cash surplus risk savvy investors may consider investment at their own risk. So we give 'NEUTRAL' rating to SME IPO.
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