Shreeshay Engineers Ltd

Started in 2006, Shreeshay Engineers Limited (SEL) is a real estate construction and engineering focused solutions company. It intends to provide supply of materials, designing and contracting capabilities as well as construction project management services. Its a part of DKG group, which has large presence in the real estate market in and around Mumbai. SEL has developed around 90,000 sq. ft. of built up real estate vide project(s) named 'Kailas Jyoti I' and 'Kailas Jyoti II' at Ghatkopar, Mumbai. Company has recently entered into works contract for construction of real estate project 'Kailas Nagar'. On financial performance front, SEL has posted turnover/net profits of Rs. 0.10 cr. / Rs. - (0.04) cr. (FY13), Rs. 0.11 cr. / Rs. - (0.05) cr. (FY14), Rs. 0.10 cr. / Rs. 0.05 cr. (FY15), Rs. 0.10 cr. / Rs. 0.04 cr. (FY16) and Rs. 0.22 cr. / Rs. 0.16 cr. (FY17). For first seven months ended on 31.10.17 of the current fiscal it has earned net profit of Rs. 0.15 cr. on a turnover of Rs. 0.29 cr. From financials, it looks very weak and no growth and then there is sudden jump in revenue and net profit in FY17 and FY18, which is very surprising. Issue is priced at a P/BV of 0.99 on the basis of post issue NAV of Rs. 15.12. For last three fiscals, it has posted an average EPS of Rs. 1.15 and an average RoNW of 7.90% on the diluted equity base of Rs. 0.49. If we annualise latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 75 against industry composite of 61.60. As per offer documents, it has indicated listed peers as Capacit'e, JMC Projects and Simplex Infra that are trading at a P/E of around 23, 21 and 20 respectively. Thus issue is very agressively priced. On merchant banker's front, this is the 20th IPO. Out of last 10 listings, 3 opened at discount, 1 opened at par, 5 opened around 1 to 3% premium and the rest 1 with premium of 20% on the day of listing.  As per financials, there is no growth till FY16 and then there is sudden jump in revenue and net profit, RoNW is 7.9% for last three fiscals and issue is aggressively priced as per latest earnings. So we give AVOID rating to this SME IPO.

• 1 Mr. Bhogin D Patel
• 2 Mr. Kishore D Patel