Started in 1995, Vishwaraj Sugar Industries Limited is a Belgaum - Karnataka based company engaged in manufacturing of sugar and other allied products. Company operates a single location sugar unit having licensed crushing capacity of 11,000 TCD. In addition to sugar they also manufacture other allied products like Rectified Spirits, Extra-Neutral Spirits, Indian Made Liquor, Vinegar, Compost, Carbon dioxide (CO2), etc. and are further engaged in the generation of Power for captive consumption as well as external sale. The business can hence be broken up into five main segments namely Sugar, Co-Generation, Distillery, Indian Made Liquor (IML) and Vinegar. The company has laboratories to test the quality standards of the products and reduce the wastage. Every single output and residue from sugarcane juice is used by the company and nothing is wasted. Vishwaraj Sugar Industries has produced 32,170 tonnes of sugar in the last financial year. VSL operates from Belgaum District, Karnataka which is one of the high recovery zones for sugar production in India. During the production of sugar, bagasse and molasses are produced which are the basic raw materials for power generation and Distillery (Spirit) manufacturing unit, respectively. Company obtains enough Bagasse during the crushing seasons, such that the electricity produced is used not just for captive consumption, but also for sale. For electricity generated over and above the captive consumption, they have entered into Power Purchase Agreements with 5 electricity distribution companies in Karnataka to supply a total of 22.4 MW. It is possible that during the year company may produce surplus energy and supply the surplus energy to other Companies / Industries based on demand. Molasses is the viscous product resultant of refining sugarcane juice. Molasses, which forms the primary raw material for the distillery unit, is fermented, distilled and made to undergo various processes for making rectified spirit and extra neutral spirit. Rectified Spirit is processed to manufacture Industrial Vinegar. Extra- Neutral spirit is further processed for manufacture of IML products. The Extra-Neutral spirit is blended to manufacture Whiskey which is sold by company under the various brands like VSL Deluxe Whisky, District-1 and VSL Black. During the last financial year, company manufactured approximately 1,23,060 boxes of IML, 1,07,79 KL of Industrial Vinegar, 3156.59 KL of Rectified Spirit and 969.47 KL of Extra-Neutral Spirit. As per financial performance, Vishwaraj Sugar has posted total income/net profits of Rs. 349.37 cr. / Rs. - (0.67) cr. (FY15), Rs. 408.65 cr. / Rs. 0.37 cr. (FY16), Rs. 322.90 cr. / Rs. 6.40 cr. (FY17), Rs. 268.93 cr. / Rs. - (3.61) cr. (FY18) and Rs. 307.88 cr. / Rs. - (17.38) cr. So company has posted zig-zag results over last couple of years. VSL has posted an average EPS of Rs. - (2.67) and average RoNW of - (4.35)% for last three fiscals. Issue is priced at a P/BV of 0.98 as per NAV of 61.20 on 31.03.19. If we attribute latest earnings of FY19 on fully diluted equity post issue, then asking price is at a P/E of - (12.96). As per RHP, industry average P/E ratio is 6 and listed peers comparison shown in above table. So issue looks aggressively priced. On BRLM's front, for Aryaman Financial Services Private Limited this is the 36th IPO in last three fiscals, company mostly deals in SME IPOs and from last 10 SME IPOs, two opened below issue price and remaining opened above issue price with 0.05% to 2% premium on the day of listing. As of now, from last 10 IPOs, two are trading below issue price and remaining above issue price. ( As on 25.09.2019 ) As per financials, results are inconsistent, RoNW is - (4.35)% for last three fiscals and company has shown loss in last two FYs. Performance of BRLM is average. So we give NEUTRAL rating to this IPO.
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