Review By Dilip Davda on September 7, 2024
Courtesy: https://www.chittorgarh.com/
- The company is in the business of manufacturing and marketing of variety of cotton.
• It posted growth in its financial performance post the Pandemic.
• Based on FY24 earnings the issue relatively appears fully priced.
• Market is witnessing fancy for textile segment counters off late.
• Well-informed investors may park funds for medium to long term.
ABOUT COMPANY:
Gajananad International Ltd. (GIL) is an ISO 9001:2015 certified manufacturer. It basically manufactures the types of cotton i.e. Mech1 Cotton, Shankar6 Cotton etc. It has constructed well-established manufacturing units for Ginning, quality inspection, Storage and packing that is equipped with all the necessary hi-tech machines and tools that are required for a modern manufacturing unit. Machinery that is equipped in its infrastructure is operated by company’s team.
The company majorly focuses in delivering quality cotton and maintaining long term association with clients. The level of advancement determines the productivity of machines and labour, which in turn, determines the production and profitability of the Company. GIL plans its business strategy on the advance intimation of the segment it is engaged and thus manages the business with cost control process.
ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden IPO of 5736000 equity shares of Rs. 10 each at a fixed price of Rs. 36 per share to mobilize Rs. 20.65 cr. The issue opens for subscription on September 09, 2024, and will close on September 11, 2024. The minimum application to be made is for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 30.45% of the post-IPO paid-up capital of the company. The company is spending Rs. 1.65 cr. for this IPO process, and from the net proceeds, it will utilize Rs. 14.99 cr. for working capital, and Rs. 4.01 for general corporate purposes.
The issue is solely lead managed by Fast Track FinsecPvt. Ltd., and Skyline Financial Services Pvt. Ltd. is the registrar to the issue. Nikunj Stock Brokers Ltd. is the market maker for the company.
Having converted initial equity shares at par value, the company issued further equity shares in the price range of Rs. 50 – Rs. 800 between October 2009 and September 2023. It has also issued bonus shares in the ratio of 15 for 1 in October 2023. The average cost of acquisition of shares by the promoters is Rs. 4.50, Rs. 4.91, and Rs. 5.41 per share.
Post-IPO, company’s current paid-up equity capital of Rs. 13.10 cr. will stand enhanced to Rs. 18.84 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 67.81 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 61.76 cr. / Rs. 0.03 cr. (FY22), Rs. 73.42 cr. / Rs. 1.41 cr. (FY23), Rs. 108.75 cr. / Rs. 2.24 cr. (FY24).
For the last three fiscals, it has reported an average EPS of Rs. 1.46, and an average RoNW of 18.35%. The issue is priced at a P/BV of 2.66 based on its NAV of Rs. 13.52 as of March 31, 2024, and at a P/BV of 1.77 based on its post-IPO NAV of Rs. 20.31 per share.
If we attribute FY24 earnings to its post-IPO fully diluted paid-up capital, then the asking price is at a P/E of 30.25. The issue relatively appears fully priced.
For the reported periods, the company has posted PAT margins of 0.05% (FY22), 1.92% (FY23), 2.06% (FY24), and RoCE margins of 13.64%, 31.30%, 29.72% respectively for the referred periods.
DIVIDEND POLICY:
The company has not declared any dividends for any financial year. It will adopt a prudent dividend policy based on its financial performance and future prospects.
COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Laxmi Cotspin, and Spright Agro as their listed peers. They are trading at a P/E of NA and 130.0 (as of September 06, 2024). However, they are not comparable on an apple-to-apple basis.
MERCHANT BANKER’S TRACK RECORD:
This is the 8th mandate from Fast Track in the last four fiscals (including the ongoing one), out of the last 7 listings, all listed with premiums ranging from 0.14% to 201.21% on the date of listing.
Conclusion / Investment Strategy
The company is in the business of manufacturing and marketing of variety of cotton. It has posted growth in its top and bottom lines for the reported periods. Based on FY24 earnings, the issue relatively appears fully priced. Considering the current fancy and bright prospects for the company, well-informed investors may park funds for medium to long term.
Review By Dilip Davda on September 7, 2024
Review Author
DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. My reviews do not cover GMP market and operators game plans. Readers must consult a qualified financial advisor before making any actual investment decisions, based the on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the recent past, SME IPOs drew the attention of investors across the board and lead to seer madness. However, as SME issues have entry barriers and continued low preference from the broking community, any reader taking decisions based on any information published here does so entirely at their own risk. The above information is based on information available as of date coupled with market perceptions. The Author has no plans to invest in this offer.
About Dilip Davda
Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.
Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.
(Dilip Davda -SEBI registered Research Analyst-Mumbai,
Registration no. INH000003127 (Perpetual)
Email id: dilip_davda@rediffmail.com ).
Courtesy: https://www.chittorgarh.com/
