Started in 1991, SK International Export Limited is a Mumbai based company engaged in manufacturing and exporting in Scarves and Beachwear. The company has both domestic and international presence (mainly in European countries such as the UK, Netherlands, Germany, Spain, France and also started US market since 2018). The product range of SK International includes headband, sarongs, shawls, scarves, bandanas and beachwear garments (of polyester, viscose, silk, wool and other qualities) for men and women. Company has also entered in manufacturing and trading of Indian ethnic wears by developing trendy duppatas for women. Company has also entered into the Kids segment with their own domestic brand Sand Kastle for Beachwear/Holiday wear garments, and fashion accessories. The raw material for manufacturing garments with a variety of trims and fabrics is sourced from all over India. The company has its own design team to bring new finishes, fits and styles. Other production facilities such as finishing, ironing, cutting, packing, sewing and quality control are also maintained by the company itself. Most of the products of the company are manufactured in an in-house factory located at Virar (Palghar). The company works on make to order basis for fashion forecast from big brands in domestic and international markets. Company has 62 number of employees employed in the manufacturing facility and at office. On the financial performance front, SK International has posted turnover/net profits of Rs. 9.35 cr. / Rs. 0.11 cr. (FY16), Rs. 9.39 cr. / Rs. 0.34 cr. (FY17) and Rs. 9.66 cr. / Rs. 1.53 cr. (FY18). For upto 31.01.19 of FY19, company has posted net profit of Rs. 0.39 on total revenue of Rs. 8.69 cr. So top-line remained almost static, but sudden increase in bottom-line in FY18 generates doubts. Trade receivables for FY18, is around 0.11 Cr which is 1% of total revenue of FY18. Promoters are paid Rs 0.26 Cr as salary in FY18 which looks very high when we look average PAT of the company. For last three fiscals, SK International has posted an average EPS of Rs. 1.92 and an average RoNW of 23.15%. The issue is priced at a P/BV of 2.66 on the basis of its NAV of Rs. 7.53 post issue. If we annualise FY19 earnings and attribute it on fully diluted post issue equity, then asking price is at a P/E of around 31, thus issue appears over priced and as per FY18 earnings P/E is 9.58 which looks reasonably priced. Comparison between listed peers is shown in above table, but they are not strictly comparable. On BRLM's front, for Finshore Management Services Limited this is the 13th IPO in last three fiscals and from last 10 IPOs, 3 opened below issue price, one at issue price and remaining opened above issue price with 0.5% to 20% premium on the day of listing. As of now, from last 10 IPOs, 7 are trading below issue price and remaining above issue price. ( As on 21.06.2019 ) Company has shown average results, RoNW is 23.15% and issue looks highly priced with respect to latest earnings. Sudden increase in bottom-line in FY18 raises concerns. Performance of BRLM is very poor. So we give AVOID rating to this SME IPO.
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