Started in 2006, Sirca Paints India Limited is a New Delhi based company, engaged in marketing and trading/distributor of paints and allied products after repackaging the same. Company use to procure the products majorly from SIRCA SPA ITALY through Import and selling them in India through its Distributors. In additional, Company also procure the products (Thinner, Abresives and BuffingCream) from other suppliers based in India. Except Thinner and Abresives which are purchased from domestic suppliers, all other 100% Purchases are made from Outside India and the products which are purchased from domestic suppliers and sold out in India Only. Company has entered into a Distributorship Contract dated 1st January, 2018 with SIRCA SPA ITALY wherein Company got the Exclusive Right to promote the sale of PU & Metal Coating under trademark SIRCA in the territory of India, Sri Lanka, Bangladesh and Nepal with a minimum turnover of EURO 43,00,000 (Four Million three hundred thousands) and EURO 48,00,000 (Four million eight hundred thousand) to be achieved in the year 2018 and 2019 respectively. SPIL has entered into a Manufacturing License Agreement dated 16th February, 2018 with SIRCA S.P.A. Italy for manufacturing the following products that Company is currently distributing under the Product Distribution Agreement. Pursuant to this agreement, Company is having an Exclusive Right to manufacture the following products in India, under the trademark 'SIRCA', for that company will pay EURO 6,00,000 as fix fee and then a royalty fee equal to 0.15 EURO per kilogram or liter of product manufactured by the licensee in India and sold by the Licensee in India, Nepal, Bangladesh and/or elsewhere.- Paints NC- Paints AC- Thinner- Polyurethane Products SPIL is planning, the production capacity of the unit is mfg. of 30,00,000 kgs of PU Thinner and 36,00,000 kgs of NC Lacquers 36,00,000 kgs of melamine and 20,00,000 kgs of Polyurethane products per annum initially, which is likely to be increased in the subsequent years. Actual utilisation is expected to be 25 % in 1st year, 40 % in 2nd year, 60 % in 3rd year and approx 75% and above in further years. Company has 128 employees on its payroll. As per financial performance, SPIL has posted total revenue/net profits of Rs. 34.02 cr. / Rs. 0.50 cr. (FY13), Rs. 54.08 cr. / Rs. 1.97 cr. (FY14), Rs. 69.77 cr. / Rs. 6.18 cr. (FY15), Rs. 72.66 cr. / Rs. 7.28 cr. (FY16) and Rs. 84.34 cr. / Rs. 13.70 cr. (FY17). For upto Q3 of the FY18 it has earned net profit of Rs. 14.60 cr. on a turnover of Rs. 64.70 cr. Thus year after year it has posted improved performance, but the bottom-line increase in FY18 is very surprising. For last three fiscals it has posted an average EPS of Rs. 8.38 and an average RoNW of 39.89% on share capital of 0.10 Cr. The issue is priced at a P/BV of 4.07 on the basis of NAV as on 31.12.17 of Rs. 39.31. If we annualise latest earnings and attribute it on fully diluted equity post issue then asking price is at a P/E of around 15. As per offer documents, peers are Kansai Nerolac Paints Ltd and Asian Paints Ltd which are trading at P/E of 93 and 55 respectively. But the peers which company has shown in RHP are market leaders and it would not be ideal compare SPIL with these giants. As per latest earnings, issue looks reasonably priced. On BRLM's front, for Navigant Corporate Advisors Ltd, this is the 12th IPO since last three fiscals and out of recent 11 listings, 3 listed below issue price, 1 at par and remaining with 1% to 20% premium on the day of listing. As of now from last 11 IPOs, 5 are trading above issue price and remaining below issue price or at par. As per financials, company's performance is very good, RoNW is 39.89% and issue is reasonably priced as per latest earnings. This industry has very high competition, but its expected to grow with good rate for next couple of years. Also, when its under construction manufacturing plant become active in next year, this may improve margins and growth further. So we give SUBSCRIBE rating to this SME IPO as per current market situation.
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