Siddhika Coating Limited

Incorporated in 2010, Siddhika Coating Limited is a strategic channel partner in India for SK Kaken Ltd. ('SKK') and an authorised importer of its products through SKK Singapore Pte. Ltd. SKK is a renowned coatings and pigments manufacturer based in Japan. Company also provides application services which include preparing and coating interior as well as exterior surfaces of civil structures using organic and inorganic architectural textured pigments and technical-grade functional coatings. Currently, Company are placed as one of the older marketers for SKK products and its specialist paint and application service providers in India. The application team manages approximately 250,000 sq. mtrs. of application contracts, annually. Company's prestigious and frequent clients include various eminent architects, real estate developers as well as government and private entities in India. Company completed over 160 projects across 11 states in India over the last three calendar years. The Company is gradually expanding its presence to various cities in India. Currently it has branch offices across 11 states, including Delhi, Haryana, Uttar Pradesh, Rajasthan, Himachal Pradesh, Karnataka, Tamil Nadu, Telangana, West Bengal, Gujarat and Maharashtra.. On the financial performance front, Siddhika has reported turnover/net profits (loss) of Rs. 22.14 cr. / Rs. 2.56 cr. (FY18), Rs. 32.23 Cr. / Rs. 3.51 Cr. (FY19) and Rs. 30.41 Cr. / Rs. 2.95 Cr in FY20. For H1 FY21, company has posted 6.14 Cr total income and 0.19 Cr net profit. So company has shown good results, but H1 of FY21 is big setback due to pandemic. For the last three years, company has posted average EPS of Rs. 13.58 and RoNW of 20.47%. The issue is priced at a P/BV of 0.82 based on its NAVs of Rs. 69.53 post issue. As per FY20 earnings, on fully diluted equity post issue, IPO is priced at P/E of around 6. If we annualise latest earnings of FY21 on fully diluted equity, than P/E is around 44. So issue looks very fully priced. As per RHP, there is no listed peers. On BRLM's front Unistone Capital Pvt. Ltd. has handled 3 IPOs in last three fiscals. From 3 IPOs, all are opened above price. As of now from 3 IPOs, 1 is trading below issue price and remaining are trading above issue price. For Siddhika Coating Limited, financial data is good, RoNW is 17.42%, P/E is around 6 for FY20 and 44 for annualised FY21. So issue looks fully priced and company expected to do well, if normalcy is returned in economy. Performance of BRLM is good. So we give NEUTRAL rating to this SME IPO and one should keep in mind risk of SME sector and low volume, before applying.

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