Sun Retail Limited

Started in 2007, Sun Retail Limited is Ahmedabad Gujarat based company engaged in the business of trading into refined/filtered edible oils. The major products include cottonseed oil, groundnut oil, sunflower oil. Company also performs activity of bulk trading of palmolein oil and soyabean oil. The products are sold under the brand name of 'Dharti' and 'Dharti Singtel' in Gujarat. Sun Retail purchases refined/filtered oils from the local oil refineries and it is sold to Kane Industries Limited for re-filtration and thereafter the final product is packed into tin containers, jars, bottles or pouches of different sizes. Thereafter Sun Retail re-purchases refined/filtered packed edible oil from Kanel Industries Limited for retail selling in the market. Company offers refined/filtered edible oil in different packing size like ranging from 15kg tin containers, 15 Litre jars, 5 Litre jars, 2 Litre jars, 1 Litre bottle, 1 Litre pouch, 500 ml bottle and 500 ml pouch. Company has entered into an agreement with its Promoter holding company TJR Agrocom Private Limited to acquire land along with entire unit situated Sirohi, Rajasthan admeasuring area of 2000 Square meters with the intention to set up crushing plant for groundnut seeds for its captive consumption. As on the August 31, 2018 company has 10 employees on its payroll. As per financial performance, SRL has posted total income/net profits of Rs. 16.44 cr. / Rs. 0.0003 cr. (FY14), Rs. 23.09 cr. / Rs. 0.01 cr. (FY15), Rs. 25.63 cr. / Rs. 0.04 cr. (FY16), Rs. 68.06 cr. / Rs. 0.19 cr. (FY17) and Rs. 65.32 cr. / Rs. 0.23 cr. (FY18). So company has shown growth but margins are very thin. Trade receivables are low compare to total revenue for FY18. For last three fiscals it has posted an average EPS of Rs. 1.21 and an average RoNW of 7.47%. Issue is priced at a P/BV of 1.31 on the basis of NAV of Rs. 17.52 post issue. If we consider latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 100 and peers are trading at P/E of around 10. So issue looks very expensive. On BRLM's front, for Fedex Securities Limited this is the 5th SME IPO. For last 4 IPO, 1 opened below issue price, two at par and one above issue price. Currently from last 4 IPOs, 1 is trading below issue price and 3 above issue price. ( As on 25.09.18 ) Company has not so impressive financials, RoNW is 7.47% and issue looks very expensive with respect to current earnings. The edible oil market is highly competitive and fragmented, and company faces competition from various organised and unorganised players. Performance of BRLM is good. So we give AVOID rating to this SME IPO.

• 1 TJR Agrocom Private Limited