Courtesy: https://www.chittorgarh.com/
Review By Dilip Davda on February 8, 2025
- The company is primarily engaged in the business of manufacturing lithium-ion batteries of various range.
• It marked growth in its top and bottom lines.
• The company is operating in a highly competitive and fragmented segment.
• The sudden boost in top and bottom lines from FY24 onwards i.e. in pre-IPO years not only surprises, but raises concern over its sustainability.
• Based on its recent financial performance, the issue appears aggressively priced.
• There appears to be some window dressing in its recent financial performance to fetch fancy valuations.
• There is no harm in skipping this pricey as well as “High Risk/Low Return” bet.
ABOUT COMPANY:
Maxvolt Energy Industries Ltd. (MEIL) is primarily engaged in the business of manufacturing of lithium-ion batteries of various range supplied through a diversified sales & distribution mix viz. authorised dealers and distributors and OEMs under brand name of “MaxVolt Energy” widely used in Electric Vehicles (i.e., E-Scooter, E- Rickshaw, ECycle), Energy Storage and Electronics Gadgets etc. It also manufactures customised batteries packs as per the requirement of manufacturers of different industries. In addition to manufacturing, it is supplier of Graphene Battery packs and Battery Chargers designed and developed by it in own brand name. The company designate some of dealers and distributors as service centres. As on September 30, 2024, it has services centre in the states Uttar Pradesh, Delhi, Bihar, Madhya Pradesh and Gujarat across, dealers and distributors has access to these service network to resolve the defects in the batteries. These service centers help it to provide fast and hassle-free service to dealers and end customers.
The Company is an ISO 9001:2015 certified. Its Manufacturing unit situated at E- 82, Industrial Area, Bulandshar Road, Ghaziabad, Uttar Pradesh spread across in 18,000 square feet. Its manufacturing Unit is strategically located in the central part with availability of all modes of transportation and facilitates convenient transportation of products, sourcing of raw materials and easy access to customers.
It currently manufactures a variety of batteries and has combined capacity to manufacture up to 97.2 MWh batteries as on September 30, 2024. MEIL intends to enhance production capabilities through backward integration vide establishing a new battery line facility at factory situated E-82, Industrial Area, Bulandshar Road, Ghaziabad, Uttar Pradesh, along with additional machineries for expansion. It intends to expand capacity and increasing product offerings through the expansion of existing facilities, addition of battery lines, which will allow it to produce a new line of parts such as re-cycling of used batteries.
Being engaged in batteries industry which is largely dominated by unorganized sector competing on pricing, supplying qualitative products is of utmost importance in industry and the company strives to ensure that it adheres to quality standards. It is dedicated towards supply of quality products by controlling the procurement of standard raw material, monitoring the process parameters, maintaining appropriate measures to manage materials and to comply with applicable statutory and regulatory requirements of products. As of September 30, 2024, it had 97 employees on its payroll.
ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route combo IPO of 3000000 equity shares to mobilize Rs. 54.00 cr. (at the upper cap). The IPO consists of 2400000 fresh equity shares (worth Rs. 43.20 cr. at the upper cap), and an Offer for Sale (OFS) of 600000 equity shares (worth Rs. 10.80 cr. at the upper cap). The company has announced a price band of Rs. 171 – Rs. 180 per share of Rs. 10 each. The issue opens for subscription on February 12, 2025, and will close on February 14, 2025. The minimum number of shares to be applied is for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 27.51% of the post-IPO paid-up capital of the company. From the net proceeds of the fresh equity issue, the company will utilize Rs. 8.90 cr. for repayment/prepayment of certain borrowings, Rs. 24.27 cr. for capex on purchase of plant and machineries, and the rest for general corporate purposes.
The IPO is solely lead managed by Smart Horizon Capital Advisors Pvt. Ltd. (erstwhile known as Shreni Capital Advisors Pvt. Ltd.), Bigshare Services Pvt. Ltd., is the registrar to the issue. Rikhav Securities Ltd., is the Market Makers for the company and also a syndicate member.
Having issued/converted initial equity shares at par value, the company issued additional equity shares in the price range of Rs. 95.75 – Rs. 159.59 between November 2023, and May 2024. It has also issued bonus shares in the ratio of 4 for 1 in January 2024, and 1 for 5in March 2024. The average cost of acquisition of shares by the promoters is Rs. 1.67, and Rs. 2.29 per share.
Post-IPO, company’s current paid-up equity capital of Rs. 8.50 cr. will stand enhanced to Rs. 10.90 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 196.27 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 6.18 cr. / Rs. 0.01 cr. (FY22), Rs. 13.92 cr. / Rs. 0.28 cr. (FY23), and Rs. 48.79 cr. / Rs. 5.21 cr. (FY24). For H1 of FY25 ended on September 30, 2024, it earned a net profit of Rs. 4.77 cr. on a total income of Rs. 41.09 cr. The quantum jump in top and bottom lines from FY24 onwards raises eyebrows and concern over its sustainability. There appears to be a window dressing to fetch fancy valuations for the IPO.
For the last three fiscals, the company has reported an average EPS of Rs. 3.99 and an average RoNW of 37.61 %. The issue is priced at a P/BV of 6.23 based on its NAV of Rs. 28.91 as of September 30, 2024, and at a P/BV of 2.92 based on its post-IPO NAV of Rs. 61.58 per share (at the upper cap).
If we attribute FY25 annualized super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 20.57. Based on FY24 earnings, the P/E stands at 37.66. Based on its recent earnings, prima facie, the issue relatively appears aggressively priced.
For the reported periods, the company has posted PAT margins of 0.23% (FY22), 2.04% (FY23), 10.77% (FY24), 11.84% (H1-FY25), and RoCE margins of 5.92%, 17.69%, 39.46%, 20.74%, for the referred periods, respectively.
DIVIDEND POLICY:
The company has not declared any dividends since incorporation. It will adopt a prudent dividend policy, based on its financial performance and future prospects.
COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown Amara Raja Energy, Exide Ind., High Energy Batteries, and Servotech Renewable, as their listed peers. They are trading at a P/E of 20.02, 40.4, 46.2, and 113.0 (as of February 07, 2025). However, they are not truly comparable on an apple-to-apple basis. This compare appears to be an eyewash.
MERCHANT BANKER’S TRACK RECORD:
This is the 2nd mandate from Smart Horizon in the ongoing fiscal. The only listing took place so far opened at a premium of 90% on the date of listing.
Conclusion / Investment Strategy
MEIL is primarily engaged in the business of manufacturing lithium-ion batteries of various range. It marked growth in its top and bottom lines. The company is operating in a highly competitive and fragmented segment. The sudden boost in top and bottom lines from FY24 onwards i.e. in pre-IPO years not only surprises, but raises concern over its sustainability. Based on its recent financial performance, the issue appears aggressively priced. There appears to be some window dressing in its recent financial performance to fetch fancy valuations. There is no harm in skipping this pricey as well as “High Risk/Low Return” bet.
Review By Dilip Davda on February 8, 2025
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 detailed fundamental and financial analysis of companies coming up with IPOs 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 ).
