South West Pinnacle Exploration Ltd

Started in 2006, South West Pinnacle Exploration Limited is a Gurgaon, Haryana based company, providing end to end drilling, exploration and allied services to coal, ferrous, non ferrous, atomic and base metal mining industries and water & unconventional energy industries. Company also provides consultancy for geological field services and allied services. Company has an in-house team of geoscientists for providing integrated exploration services including geophysical logging, surface geophysical & topographic surveys. Company is also into aquifer mapping for Hydro-geological organisations in India for determining the quantity and quality of groundwater in a particular area, viz., water level, productivity and concentration of various chemicals in groundwater. This helps in identifying zones for groundwater development, groundwater recharge, rainwater harvesting etc. Company has 37 operational rigs. Company drill upto a depth of 2500 meters and has completed more than 9,50,000 meters of drilling including 60 CBM exploratory and 166 CBM production wells for both Government and Private Sectors. On financial performance front, SWPEL (on standalone basis) has posted turnover/net profits of Rs. 37.82 cr. / Rs. 0.30 cr. (FY14), Rs. 52.24 cr. / Rs. 2.82 cr. (FY14), Rs. 63.41 cr. / Rs. 2.91 cr. (FY15), Rs. 84.93 cr. / Rs. 3.86 cr. (FY16) and Rs.72.74 cr. / Rs. 6.01 cr. (FY17). For first half of current fiscal, it has earned net profit of Rs. 3.25 cr. on a turnover of Rs. 36.44 cr. Although it suffered a setback in top line for FY17, it posted higher net due to lower finance cost and other expenses. On consolidated basis it has earned net profit of Rs. 6.11 cr. on a turnover of Rs. 74.75 cr. for FY17 and posted net profit of Rs. 3.27 cr. on a turnover of Rs. 37.32 cr. for first half of current fiscal. On standalone basis it has posted an average EPS of Rs. 5.17 and RoNW of 18.21% on an equity base of Rs. 4.65 crore. Issue is priced at a P/BV of 2.45 based on its consolidated basis NAV of Rs. 31.80 as on 31.03.17. If we annualize latest earnings and attribute it to fully diluted post issue equity, then asking price is at a P/E of around 17 against peer Selan Exploration and Deep Ind. Trading at a P/E of 42 and 9 respectively. So issue is priced reasonably. On merchant banker's front, this is the 62nd mandate from its stable in last three fiscals. Out of last 10 listings, 1 opened around par and the rest with premiums ranging from 1% to 130% on the day of listing. 130% rewards are from the only main board IPO of Astron Paper. As per financials, company's growth is consistent, RoNW is 18.21% for last three fiscals and issue looks reasonably priced as per latest earnings. With growth in infra sector and push from Government, this sector will get benefited as demands for different raw materials will increase. So, we give SUBSCRIBE rating to this SME IPO.

• 1 Mr. Piyush Jain
• 2 Mr. Vikas Jain