Started in 2005, Shankar Lal Rampal Dye-Chem Limited is Bhilwara - Rajasthan based company, engaged in the business of trading of Dyes and chemical products. The company mainly specializes in Hydrogen Peroxide, Sodium Bi Carbonate 99.5%, Sodium Meta Bi Sulphite 97%, Soda Ash Light, Linear Alkyl Benzene Sulphonic Acid 90% and many others chemicals. The company trades in all types of Sulphur Dyes. The Dyes and Chemicals in which Company deals in, mainly caters to Textiles &Garments manufacturing Industry, Food andBeverages Industries, Laboratory, Leather, Candel making industries, Plastic Industries, Agriculture, Water Treatment, Personal Care & Cosmetics Industries, Plywood Industry etc. The Company also trades in speciality performance chemicals used in Textile Dyeing and Printing Industry. The Trading facility of the Company is situated at Bhilwara (Rajasthan) where company's operations are centralised which controls the trading activities in Mumbai (Maharashtra) and Delhi where they have rented warehouses for stocking the products and onward sale to our customers. As of September, 2018 Company has 9 whole-time employees. As per financial performance, SR Dye-Chem has posted total income/net profits of Rs 23.42 cr. / Rs. 0.07 cr. (FY14), Rs 21.95 cr. / Rs. 0.06 cr. (FY15), Rs 25.99 cr. / Rs. 0.10 cr. (FY16), Rs 29.19 cr. / Rs. 0.11 cr. (FY17) and Rs 75.17 cr. / Rs. 0.96 cr. (FY18). For upto Q1 of FY19, company has posted net profit 1.52 cr. with total income of 40.85 cr. So the company has shown very big rise in top-line and bottom-line in FY18 and Q1 FY19, which is very surprising. Trade receivable are 22.42 Cr for FY18 which is around 30% of FY18 total earnings and same was around 15% for FY17 total earnings. For last five fiscals, it has posted an average EPS of Rs 2.05 and an average RoNW of 2.36%. Issue is priced at a P/BV of 0.89 on the basis of post issue NAV of Rs. 50.71. If we consider latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 4.44 and as per FY18 earnings P/E is around 28. So issue looks attractively priced as per FY19 future earnings. But if company can maintain the sudden jump in earnings shown in FY18 and FY19 in future also, than only it can be reasonably priced. As per RHP company has shown Jaysynth Dyestuff (India) Ltd, Camex Limited and Bhageria Industries Limited as listed peers and these stocks are currently trading at P/E pf 18.5, 13.81 and 8.26 respectively (as on 10.12.18). But these stocks are not strictly comparable with SR Dye-Chem. On BRLM's front, for Finshore Management Services Limited this is the 7th SME IPO. From last 6 IPOs, 3 opened below issue price and 3 above issue price with 1% to 20% gains. As of now from last 6 IPOs, 4 are trading below issue price and 2 above. ( As on 11.12.18 ) As per financials, it looks very average, RoNW is 2.36% and issue looks very reasonably priced with respect to current earnings. But sudden rise in top-line and bottom-line is very surprising and if company can repeat the performance in future, than only current price is reasonable. Performance of BRLM is poor. So we give AVOID rating to this SME IPO.
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