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Sah Polymers Ltd : AVOID

Sah Polymers Ltd : AVOID
  • Date

    30 Dec 2022 - 04 Jan 2023

  • Price Range

    ₹61 - ₹65

  • Minimum Order Quantity

    230

  • (D) RHP

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Incorporated in 1992, Sah Polymers Ltd. is primarily engaged in the manufacturing and selling of Polypropylene (PP)/High-Density Polyethylene (HDPE) FIBC Bags, Woven Sacks, and HDPE/PP woven fabrics based products. The company also provides customized bulk packaging solutions to business-to-business (“B2B”) manufacturers catering to different industries such as agro pesticides, basic drugs, cement, chemical, fertilizer, food products, textiles, ceramic and steel. Sah Polymers Ltd. has divided its business into two parts – domestic sales (56.38% of FY22 revenues) and exports (43.62% of FY22 revenues). For its domestic market, the company has increased its presence in 5 states and 1 union territory and on the international front, they export the products to 14 countries such as Algeria, Togo, Ghana, Poland, Portugal, France, Italy, Dominican Republic, USA, Australia, UAE, Palestine, UK and Ireland. Presently, the company has one manufacturing facility with an installed production capacity of 3,960 MTPA located at Udaipur, Rajasthan.
Objects of the issue:
The IPO proceeds of the fresh issue will be used towards the following purposes:
  • Setting up of a new manufacturing facility to manufacture new variant of Flexible Intermediate Bulk Containers (FIBC).
  • Repayment/ Prepayment of certain secured and unsecured borrowings in full or part availed by the Company and the Subsidiary Company.
  • Funding the working capital requirements of the Company.
  • General corporate purposes.
Investment Rationale:

New manufacturing facility set to widen the company’s product portfolio mix 
The company aims to set up a new manufacturing facility for manufacturing Flexible Intermediate Bulk Containers (FIBC) with an annual installed capacity of 3,960 MTPA. The current facility of the company manufactures a diverse range of HDPE/PP Woven Sacks and FIBC products with a filling capacity of around 500 KGs per bag/sack. With the new manufacturing facility in place, the company intends to manufacture bags with filling capacities of around 2,500 KGs. This is in line with the expansion plans of the company that aims to cater to the growing demand of the customers and increase its revenue from operations.

Diversified customer base and product offerings bode well for risk mitigation 
The company has a wide customer base and offers its services across multiple industries and geographies both at domestic and overseas locations. The company follows a B2B customer segment model, catering to packing requirements of varied industries including agro pesticides, basic drugs, cement, chemical, fertilizer, food products, textiles, ceramic and steel. Additionally, the company sells its products through commission agents domestically and through overseas representatives and merchant exporters globally. Thus, with this well-diversified model, Sah Polymers Ltd. has reduced its dependence on any one particular industry or location and protected itself against any market instability in the future.

Valuation and Outlook:
On the way forward, Sah Polymers Ltd. aims on increasing its penetration level in its existing markets and focus more on the domestic side of the business. In January 2022, the company acquired Fibcorp Polyweave Private Limited which helped it to gain a competitive advantage in the market. It is important to note that the name of one of the promoters group company ‘Aeroflex Industries Limited’ appeared in the RBI defaulters list issued by CIBIL in the past. On the upper end of the price band, the issue is valued at a P/E of 23.1x based on FY2022 earnings which is on the steeper side compared to its listed peers (Rishi Techtex and Jumbo Bag). We, therefore, remain cautious over this issue and recommend an “AVOID” rating.

Elin Electronics Ltd : SUBSCRIBE

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Elin Electronics Ltd : SUBSCRIBE
  • Date

    20 Dec 2022 - 22 Dec 2022

  • Price Range

    ₹234 - ₹247

  • Minimum Order Quantity

    60

  • (D) RHP

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Incorporated in the year 1991, Global Surfaces Ltd. (GSL) is involved in the business of mining, producing, and exporting natural stones and engineered quartz. The company’s product offering includes slabs and countertops that can be used for various purposes like flooring, indoor wall cladding, vanity tops, reception desk, table tops, staircases, and more. Presently, the company has two manufacturing units in Rajasthan, with Unit I exclusively dedicated to processing natural stones such as marble, granite, and quartzite and Unit II for manufacturing engineered quartz. The company is an export-driven business (derived ~99% of revenue through exports for FY20, FY21, and FY22) and sells products in countries like the United States of America, Canada, Australia, and the Middle East.
Objects of the issue:
The IPO proceeds of the fresh issue will be used towards the following purposes:
  • Repayment/ prepayment, in full or part, of certain borrowings availed by the Company
  • Funding capital expenditure towards upgrading and expanding its existing facilities
  • General corporate purposes
Investment Rationale:

Established market position in key verticals, including leadership in the fractional horsepower motors segment, bodes well for future

The Company’s robust R&D setup helps in the design, manufacturing, and selling of a range of fractional horsepower motors including universal motors, exhaust fan motors, cooler motors, table fan motors, synchronous motors, sub pump, and fan blower motors. Elin has substantial backward integration in the manufacturing of fractional horsepower motors which includes press machines and moulding machines to manufacture sheet metal and plastics parts which are used in fractional horse power motors. It continues to enhance the production of fractional horsepower motors through the purchase of machinery and equipment. In addition, it continues to focus on increasing the production of metal parts, moulded parts, tools, and cartridge assembly, which will result in enhanced backward
integration and increased productivity across all product verticals. In June 2022, the Company received approval under the Production Linked Incentive (“PLI”) Scheme for White Goods (Air Conditioners and LEDs) for manufacturing of specified eligible products in the LED (components) target segment, with a committed investment of Rs. 100 million. Rising disposable income, electrification across India, and decreasing prices due to increasing competition is expected to boost the demand for household appliances. Moreover, government initiatives such as power for all and housing for all programs such as Pradhan Mantri Awas Yojana are key growth drivers for the demand for fractional horsepower motors in India. We believe that the Company’s deep market penetration, expansion plans for manufacturing facilities as well as backward integration will enable it to be well-positioned to capture the growing demand.

A high degree of backward integration has resulted in greater efficiencies, enhanced quality of products, and customer retention

Elin Electronics has always placed a strong focus on expanding its technological expertise in manufacturing its products and integrating its services.This has enabled the Company to increase its efficiencies and become an ideal partner for its customers, thereby maintaining an edge over other competitors. They have set up in-house manufacturing for die and mould, sheet metal components, plastic moulded components, aluminium dies casting, and surface coating. Moreover, they have machineries that produce best-in-class tools and dies which in turn support best-quality components and subassemblies. As on October 31, 2022, their setup included 157 moulding machines and 104 power presses which helped to bring efficiencies and economies of scale. It is to be noted that the Company has an in-house PCB assembly on surface mount technology (SMT) which is a critical part of its manufacturing process and prowess. The Company’s backward integration provides the benefit of greater control over the manufacturing process, quality, and the corresponding benefits of cost efficiencies, thereby improving their margins. Elin’s backward integration also enables them to have less dependency on third parties, gain control over the quality of components required for manufacturing, have an upper edge in designing products, improve operational and functional efficiencies and gain strategic advantages over competitors. Thus, they can fulfill customers’ requirements on time and enhance their ability to offer cost-competitive ‘one-stop-shop’ solutions.

 
Valuation and Outlook:
The global electronics manufacturing services market is traditionally comprised of companies that manufacture electronic products, predominantly assembling components on Printed Circuit Boards (PCBs) and box builds for major brands. Currently, brands are witnessing more value from EMS companies, leading to their involvement beyond just manufacturing services to product design and development, testing, and aftersales services, such as repair, remanufacturing, marketing, and product lifecycle management. The total addressable EMS market in India was valued at Rs. 2,654 billion (USD 36 billion) in FY2021 and is expected to grow to Rs. 9,963 billion (USD 135 billion) in FY2026, registering a CAGR of 30.3% over the period. However, the contribution of Indian EMS companies is around 40%, which is valued at Rs. 1,069 billion (USD 14 billion) in FY2021, which is expected to grow at a 41.1% CAGR to reach Rs. 5,978 billion (USD 81 billion) by FY2026. In Fiscals 2020, 2021, and 2022 and seven months ended October 31, 2022, Elin catered to 327, 387, 342, and 297 customers, respectively. The Company intends to increase cross-selling of its products to increase its customer base in various product verticals and expand into new or adjacent product verticals with its existing customers. By developing products with existing customers and offering a broad range of products across segments, the Company has increased customer dependence and positioned itself as a preferred supplier to its customers across segments. On the upper end of the price band, the issue is valued at a P/E of 25.8x based on FY2022 earnings which we feel is fairly priced compared to its peers, although its peers are bigger in terms of operations. We, therefore, recommend a “SUBSCRIBE” rating for the issue

KFin Technologies : AVOID

KFin Technologies : AVOID
  • Date

    19 Dec 2022 - 21 Dec 2022

  • Price Range

    ₹347 - ₹366

  • Minimum Order Quantity

    40

  • (D) RHP

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Incorporated in 2017, KFin Technologies Limited is a leading technology driven financial services platform providing comprehensive services and solutions to the capital markets ecosystem including asset managers and corporate issuers across asset classes in India. The company also provides several investor solutions including transaction origination and processing for mutual funds and private retirement schemes in Malaysia, Philippines and Hong Kong. KFin Technology is India’s largest investor solutions provider to Indian mutual funds based on the number of AMC clients serviced. The company provides services to 24 out of 41 AMCs in India, representing 59% market share based on the number of AMC clients. Further, through the acquisition of Hexagram, the company serves 6 AMCs in India on fund accounting. KFin is the only investor and issuer solutions provider in India that offers services to asset managers such as mutual funds, alternative investment funds (AIFs), wealth managers and pension as well as corporate issuers in India, besides servicing overseas clients in South-East Asia and Hong Kong. The company is servicing 301 funds of 192 asset managers in India, representing 30% market share based on the number of AIFs being serviced. The company is also one of the three operating central record keeping agencies (CRAs) for the National Pension System (NPS) in India.
Objects of the issue:
The IPO proceeds of the issue will be used towards the following purposes:
  • To carry out the offer for sale.
  • To achieve the benefits of listing the equity shares on the stock exchanges
Investment Rationale:
Scalable platform, robust growth track record and market leadership provides confidence about the company’s growth prospects
KFintech is a leading technology driven financial services platform providing comprehensive services and solutions to the capital markets ecosystem including asset managers and corporate issuers across asset classes in India. It is one of the two leading investor solutions providers in India and provides services to 24 out of 41 AMCs in India, representing 59% market share based on the number of AMC clients. Further, within investor solutions for Indian mutual funds, they held a market
share of 32% based on the overall AUM managed by their clients and serviced by them. Out of the 60 AMCs in Malaysia, they are servicing 18 AMC clients in Malaysia, in addition to 3 clients in Philippines and Hong Kong. The company holds a 46% market share based on the market capitalization of NSE 500 companies in India’s issuer solutions space. The company serves more than 5,051 listed and unlisted corporates with 107.7 million issuer solutions folio out of a total of 172.9 million folios.
Also, the company had a 40% and 29% market share based on the number of mainboard initial public offerings handled in FY22 and H1FY23, respectively. They are servicing 301 funds of 192 asset managers in India, representing 30% market share based on the number of AIFs being serviced. The revenue from their investor solutions, issuer solutions and global business services grew at a CAGR of 26.6%, 20.6% and 8.1%, respectively, between FY20 and FY22. Moreover, the company’s technological backbone is inherently scalable in nature which helps to expand operations with minimal impact on the margin profile.
Strong growth prospects across large markets in India and South-East Asia gives sectoral tailwinds to the business
KFintech is geographically diversified and operates in multiple large markets including India, Hong Kong, Malaysia and Philippines, along with a presence in Oman and Maldives, across several asset classes. This has allowed the company to grow as a regional business and not just as an India focused business. Moreover, the countries in South-East Asia and Hong Kong represent a large mutual fund AUM and robust expected growth in mutual fund AUM in these countries is expected to aid,
KFintech’s business. On the domestic side, the market leadership in India and strong client relationships provide the company with a platform to benefit from the anticipated growth in the Indian economy. A combination of macro factors in KFintech’s end-markets such as increased government focus, higher investor pool and client engagement, broadening distribution channels, digital disruption, and a shift in the attitude of investors provides the company with a significant growth opportunity across these markets.
Valuation and Outlook:
KFin Technologies, a leading technology driven financial services platform, grew at a CAGR of 19.2% during FY2020-22 period. Going forward, the company plans to expand internationally beyond the geographies they are already present. This is likely to be executed by further enhancing their global delivery model wherein the company will look to become delivery partners to global investors and issuer services providers. KFintech is also actively pursuing new client acquisition across their service offerings and different businesses. Furthermore, the company operates an attractive asset-light business model, with a demonstrated track record of consistent profitability, returns and strong free cash flows. It is interesting to note that the company’s IPO issue is 100% OFS. On the upper price band, the issue is valued at a P/E of 38.8x based on FY2022 earnings which we feel is richly valued. We, therefore, recommend a “AVOID” rating for the issue

Landmark Cars : AVOID

Mankind Pharma Ltd : AVOID
  • Date

    13 Dec 2022 - 15 Dec 2022

  • Price Range

    ₹481 - ₹506

  • Minimum Order Quantity

    29

  • (D) RHP

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Established in 1998, Landmark Cars Limited is engaged in the automotive retail business in India, focusing on the premium and luxury automobile segment. The company has dealerships for Mercedes- Benz, Honda, Jeep, Volkswagen, and Renault along with the dealership of Ashok Leyland for selling commercial vehicles. The company operates in all the business verticals of the automotive retail value chain viz. sales of new vehicles, after-sales services and repairs which include the sale of spare parts, lubricants, accessories etc., and sales of pre-owned passenger vehicles and facilitation of the sales of third-party financial and insurance products. As on June 30, 2002, the company had a total of 112 outlets, comprising of 59 sales showrooms and 53 after-sales service and spares, spread across 32 cities in eight states and union territories including Maharashtra, Uttar Pradesh, Gujarat, Haryana, Madhya Pradesh, Punjab, West Bengal and the National Capital Territory of Delhi (NCR region). According to a CRISIL Report (September 2022), these states and union territories constituted approximately 51% of Indian vehicle demand in FY2022. For the three months ended June 30, 2022, the company’s new vehicles sales stood at 5,398 units which comprised around 73.3% of total revenues, while it serviced 72,521 units which constituted around 20.6% of total revenues. The company is foraying into the EV sales space and has signed a letter of intent with BYD, a leading player in the global EV market, for dealerships in the NCR region and Mumbai. The company also has ownership in Chatpay Commerce Pvt. Ltd. (Pitstop) that provides training to technicians for multi-brand car service and repairs and Sheerdrive Pvt. Ltd. that focuses on digitalizing used car transactions at new car dealerships using its SaaS platform.
Objects of the issue:
The objects of the net fresh issue is to raise funds for
  • Pre-payment, in full or part, of borrowings availed by the company’s subsidiaries
  • General corporate purposes.
Investment Rationale:
Market leadership in the Indian car dealership market along with longstanding relationships with OEMs offers significant competitive advantage
For FY2022, the company was the top dealer for Mercedes-Benz in terms of retail sales, and Jeep and Honda in terms of wholesale sales. The company contributed about 15.8% to the total Mercedes -Benz retail sales in India, having sold 1 out of every 6 vehicles of the brand in India. For CY2021, company was the top contributor to Volkswagen retail sales and was the third largest dealership in India for Renault in terms of wholesale sales contribution. The company also has longstanding relationships with its OEM partners, providing multiple competitive advantages over other players in similar category like ease in expanding to new cities, infrastructure and manpower sharing across brands, etc. The company also leverages its relationships with OEMs to expand across business verticals of the retail automotive business and to execute large-scale marketing campaigns. Additionally, the premium and luxury car market is expected to grow at a CAGR of 10-12% and 14-16%, respectively, over FY2022-27 period, benefitting the company as these segments are the company’s key focus areas.
Robust after-sales business coupled with focused expansion plans likely to aid margins
The company has a growing presence in the after-sales market, having 53 service and repair outlets across geographies in India. The after-sales services and repairs segment provides a stable revenue pipeline to the company, forming approximately 19.7% of total revenues for FY2022, with an EBITDA margin of around 18.2%. For FY2022, the company serviced an average of 14 vehicles for each new vehicle sold, earning about Rs. 21,030 for every vehicle serviced. Furthermore, OEM’s warranty and service programs bundled with vehicle sales create significant barriers of entry for new players, as warranty work is generally to be performed at authorized service centers. Additionally, the company also benefits from the sale of spare parts to local unorganised garages. The company further wants to expand and enhance its high-margin services and repairs business through capacity addition and technological advancements in the business vertical.
Valuation and Outlook:
The Indian automobile industry is experiencing healthy growth due to a rise in income levels and favourable economic growth. The luxury and premium passenger vehicle market is gathering traction in recent times with an increased demand for pricier UVs, easier availability of credit and increased disposable incomes, providing Landmark Cars with a great potential to expand further. The company has a strong presence in states where demand for premium and luxury vehicles is strong compared to other market segments. However, any restrictions or adverse covenants imposed by OEMs along with the possibility of non-renewal of agreements by OEMs could adversely affect the company’s business. On the upper end of the price band, the issue is valued at a P/E of 29x based on FY2022 earnings which we believe is richly valued. We, therefore, have a cautious view and recommend “AVOID” to the IPO.

Sula Vineyards Ltd : SUBSCRIBE for Listing Gains

sulavine
  • Date

    12 Dec 2022 - 14 Dec 2022

  • Price Range

    ₹340 - ₹357

  • Minimum Order Quantity

    41

  • (D) RHP

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Incorporated in 2003, Sula Vineyards Ltd. is currently India’s largest wine producer and seller. The company classifies its business under two major categories i.e. the wine business and the wine tourism business. In the domestic wine industry, Sula Vineyards has emerged as the market leader, with an overall market share of 52% in the grapes wine category in terms of both sales volume and value. Furthermore, Sula is recognized as a market leader in all four price segments of wine i.e. ‘Elite’ (Rs.950+), ‘Premium’ (Rs. 700-950), ‘Economy’ (Rs. 400- 700), and ‘Popular’’ (
Objects of the issue:
The IPO proceeds of the issue will be used towards the following purposes:
  • To carry out the offer for sale.
  • To achieve the benefits of listing the equity shares on the stock exchanges
Investment Rationale:
High barriers to entry provide cushion to the business both in terms of scale and profitability
Developing and setting up vineyards for wine-making requires high capital expenditure and a long lead time. To ensure value chain integration, wineries enter into long-term contracts with farmers, with a typical term of up to 12 years. As of June 30, 2022, Sula Vineyard had access to approximately 2,521 acres of vineyards, a significantly higher number compared to the second-largest wine company in the Indian market which has around 460 acres. Moreover, long-term supply arrangements
and technical support provided by the company coupled with their stellar reputation make them favourable for entering/renewing contracts. This makes it comparatively difficult for new entrants to venture into the Indian wine industry, as they lack that level of scale and backward integration.
Strong growth expectations in the industry to provide further tailwinds to the company’s growth trajectory
The size of the Indian wine market is comparatively smaller compared to other developed and developing economies. In the overall Indian alcohol industry, wine contribution is merely 1% which creates immense opportunity for the growth of the business. In FY2022, the wine industry in India is estimated at 2.6 million cases which is further projected to grow to 3.9 million cases by FY2025, registering
a CAGR of around 14% in volume. Additionally, multiple demand factors like wider acceptance of wine as a social drink, the large share of young population, and increased perception of wine as a healthier alternative to spirits put Sula Vineyards in a favorable spotlight.
Valuation and Outlook:
One of the fastest-growing alcoholic beverage companies in India, Sula Vineyards, grew at a CAGR of 13.3% in FY2011-22 period. The company has also been successful in consistently raising the prices of its wines by an annual average of 6% for the FY2019-22 period. Moreover, with Sula gaining a higher demand for its ‘Elite’ and ‘Premium’ categories, it puts the company in a sweet spot for margin expansion. Going forward, the company aims to focus on its brands more than the import and
distribution of third-party brands. To further increase its brand visibility, it continues to expand its wine tourism business. In FY2022 ,the company reported a healthy ROCE ratio of 20.86% and a low debt to equity ratio of 0.58. On the upper end of the price band, the issue is valued at a P/E of 52.6x based on FY2022 earnings which we feel is fairly priced . Hence, we recommend a “SUBSCRIBE” rating for the benefit of listing gains.

Abans Holdings Ltd : AVOID

Abans Holdings Ltd : AVOID
  • Date

    12 Dec 2022 - 15 Dec 2022

  • Price Range

    ₹256 - ₹270

  • Minimum Order Quantity

    55

  • (D) RHP

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Abans Holding Ltd. was incorporated in September 2009 by first-generation entrepreneur Mr. Abhishek Bansal. Abans is a holding company that operates its businesses through 17 subsidiaries which consist of three direct subsidiaries and fourteen indirect/step-down subsidiaries. The company is a diversified global financial services provider, which has its base in India, providing various services such as NBFC, multi-asset global institutional trading in equities, commodities and foreign exchange, private client broking, asset management & investment advisory and wealth management to corporate, institutional and high net worth individual clients. It is worthwhile to note that the company has grown from being a commodity trading company in its inception into a diversified multi-asset and multi-national financial services company. The company’s financial services business caters to mainly three verticals – finance business, agency business, and capital business. The finance business represents the lending business of the company where the source of revenue is the interest income and the total lending assets as of 31st August 2022 stood at around Rs. 174 crores. Abans’ NBFC business is primarily focused on providing Indian Rupee-denominated secure and unsecured structured-term financing solutions to private traders and other small and medium businesses in the category of small and medium enterprises (SMEs). In its agency business, it acts as a financial intermediary wherein it earns stock broking income, consultancy and advisory income, wealth and asset management commissions, and commissions from transactional advisory services. The capital business vertical comprises mainly internal treasury operations including physical commodities trading along with exchange-based trading in foreign exchange, equities, and commodities, and also includes groups investments and dividend incomes. The company also operates in certain non-trading but related businesses that are starting points for a diversified financial business group. It involves the business of warehousing, agri-trading, and payment gateway services through its subsidiaries and contributes less than 2% of the company’s total gross operating income.
Objects of the issue:
The IPO proceeds of the issue will be used towards the following purposes:
  • Further Investment in NBFC Subsidiary (Abans Finance Pvt. Ltd.) for financing the augmentation of its capital base to meet future capital requirements.
  • General corporate purpose.
Investment Rationale:
An integrated financial services platform allows a large product bandwidth to customers
Abans offers an integrated financial services platform, offering various financial services and products, including financing, institutional trading, private client brokerage, asset management, and investment advisory services. The company has a competitive edge as these services are provided not only in the Indian markets but across various markets and exchanges globally. The company has membership across major exchanges in India such as BSE, NSE, MSEI, NCDEX, ICEX, MCX, and IIEL. Apart from this, it also has membership across the globe for global commodity and forex exchanges which includes London Metal Exchange (LME), Dubai Gold & Commodities Exchange (DGCX), Dalian Commodity Exchange (DCE), and Shanghai International Energy Exchange (INE). The company’s integrated service platform allows it to leverage relationships across lines of businesses and their industry/product knowledge by providing multi-channel delivery systems to its client base, thereby increasing its ability to cross-sell its services.
Global exposure in providing innovative financial products gives an edge to the company
The company is a global financial services provider offering opportunities in multi-asset global institutional trading in equities, commodities, and foreign exchange, private client broking, asset management, investment advisory services, and wealth management services to corporate, institutional, and high-net-worth individual clients. The company’s international exposure helps its customers to diversify their portfolio, which in turn provides a balance between geographies. The company has adopted innovative technology due to which it offers its clients an advanced trading platform and FIX API connectivity that provides ultra-low latency. The unique selling point of the company is that it offers a Contract for Difference (CFD) product to its institutional and HNI clients with a risk appetite. CFDs are a leveraged derivate product wherein the difference in the value of an asset from the time of opening of such a contract to its closure is exchanged under a specific contract/agreement. In such transactions, though, the client is not the owner of the financial instrument traded, they stand to benefit from any market movements, which are in their favor, thus providing them with large risk-based investment leverage. Global access allows the company to deploy its treasury funds in the most viable transactions and thus providing them with leveraging opportunities across different locations.
Valuation and Outlook:
India’s diversified financial sector is undergoing rapid expansion, both in terms of strong growth of existing financial services firms and new entities entering the market. The Government of India has introduced several reforms to liberalize, regulate and enhance this industry. Thus, we find Abans being one of the beneficiaries due to such reforms. Moreover, despite the shocks in past such as the pandemic and current geopolitical situation, Abans Holding was able to grow at PAT levels in the last two years . The company’s decadal experience in dealing with global equity, commodities, and forex markets has given it confidence in expanding into complementary businesses. However, any economic slowdown or recession that is highly unpredictable, may adversely affect business operations, and future financial performance. Moreover, the company operates in a highly competitive environment and a crowded space where there is little differentiation in terms of product offerings. On the upper end of the price band, the issue is valued at a P/E of around 20.1x on FY2022 earnings. We, therefore, have a cautious view and recommend an “AVOID” to the IPO.

Uniparts India Ltd : SUBSCRIBE

uniparts
  • Date

    30 Nov 2022 - 02 Dec 2022

  • Price Range

    ₹548 - ₹577

  • Minimum Order Quantity

    25

  • (D) RHP

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Uniparts India Ltd., established in 1994, is a global manufacturer of engineered systems and solutions. The Company offers systems and components for the off-highway market in the agriculture and construction, forestry and mining (“CFM”) segment, and aftermarket sectors to over 25 countries across the globe. It is a concept-to-supply player for precision products for off-highway vehicles (“OHVs”) with a significant presence across the value chain. The Company’s product portfolio includes core product verticals of 3-point linkage systems (“3PL”) and precision machined parts (“PMP”), as well as adjacent product verticals of power take-off (“PTO”), fabrications and hydraulic cylinders or components thereof. Uniparts offer fully integrated engineering solutions from conceptualization, development, and validation to implementation and manufacturing of the products. The Company is a leading manufacturer of 3PL and PMP products and supplies to many reputed global companies. In FY2022, it is estimated that Uniparts commanded a 16.68% market share of the global 3PL market and an estimated 5.92% market share in the global PMP market in the CFM sector, both in terms of value. The Company also caters to the aftermarket segment, especially for the 3PL product range. Uniparts also provide replacements of 3PL parts to organized aftermarket retailers and distributors in North America, Europe, South Africa, and Australia.
Objects of the issue:
The IPO proceeds of the fresh issue will be used towards the following purposes:
  • To carry out the offer for sale
  • To achieve the benefits of listing the equity shares on the stock exchanges.
Investment Rationale:
Strategically located manufacturing and warehousing facilities offer scale and flexibility
Uniparts India has 6 manufacturing plants which are strategically located across India and the United States of America. The Company’s aggregate installed capacity across these manufacturing facilities is 67,320 metric tonnes per annum as of 30th June 2022. Due to the company’s dual-shore capabilities, the company can undertake manufacturing of products at different locations and service customer requirements from alternate locations, providing customers the benefit of regular supply and cost competitive manufacturing operations. The Company has three international warehousing facilities in Germany and the United States that allows it to service and grow in these markets efficiently by becoming a local supplier to global original equipment manufacturers (OEMs). Uniparts’ proximity to its
key customer groups provides it with a strategic advantage in ensuring cost-effectiveness, quicker delivery, and faster turnaround times. With the Company’s continuous investments in facilities and capabilities, they have been able to develop an efficient, technology-driven manufacturing process that has led them to manufacture products as per the requirements and specifications of the customers in a cost-effective manner.
Enhanced engineering, innovation, and design competence strengthens product portfolio
The Company focuses on process and product innovation and value engineering solutions to meet the requirements of a wider range of vehicles, geographies, applications, and other customer specifications. This has helped the Company to strengthen and diversify its customer and product portfolio. Uniparts’ has continuously improved its in-house value engineering, testing, design, and process innovation capabilities through human resource and technical development, as well as exploring opportunities for collaboration and inorganic growth. The Company has continuously worked with its key customers to upgrade and customize the products, in particular, to increase sales of 3PL products in the higher horsepower (more than 60HP) tractor segment and of PMP, hydraulic cylinders and PTO applications.
Valuation and Outlook:

The global market for 3PL systems (~56% of FY2022 revenues) is expected to grow at a CAGR of 6% – 8% through CY2026, aided by strong global tractor production volumes. With India accounting for about 50% of the global tractor production, we believe that Uniparts India is in a sweet spot to leverage this opportunity going forward. Additionally, multiple business drivers such as fully integrated engineering solutions, long-term relationships with OEMs, the strategic location of manufacturing
and warehousing facilities, global footprint, and geographically diversified revenues should provide further tailwinds to the business. However, an unexpected slowdown in tractor production due to economic headwinds and the company’s high dependency on its top customers for revenues continue to remain key risks. On the upper end of the price band, the issue is valued at a P/E of around 15.1x which we feel is fairly valued, given the fact that the company has healthy RoCE and RoAE ratios
(31% and 26.8%, respectively for FY2022) along with low debt. We, therefore, recommend “SUBSCRIBE” to the IPO.

Dharmaj Crop Guard Ltd : SUBSCRIBE FOR LISTING GAINS

Dharmaj-Crop-Guard-IPO
  • Date

    28 Nov 2022 - 30 Nov 2022

  • Price Range

    ₹216 - ₹237

  • Minimum Order Quantity

    60

  • (D) RHP

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Dharmaj Crop Guard Limited (DCGL), an agrochemical company, is engaged in manufacturing, distributing, and marketing a wide range of agrochemicals such as insecticides, fungicides, herbicides, plant growth regulators, micro fertilizers, and antibiotics to B2C and B2B customers. The company markets and distributes its own branded agrochemical products, the ones in-licensed by them and other generic brands to Indian farmers. For its domestic branded business, it has a well-established distribution network that comprises over 4,362 dealers having access to 16 stock depots and a presence in 17 states. On the global front, the company has extended its export reach to more than 25 countries in Latin America, East African countries, the Middle East, and Far East Asia. Presently, the company has one manufacturing facility in Gujarat, with an aggregate installed capacity of 25,500 MT for its agrochemical formulations. As a part of its expansion plan and to achieve backward integration of its operations, DCGL has acquired additional land in Gujarat where it plans to set up a manufacturing facility for agrochemical technicals and its intermediaries in the future.
Objects of the issue:
The IPO proceeds of the fresh issue will be used towards the following purposes:
  • Funding capital expenditure towards setting up of a manufacturing facility at Saykha, Baruch, Guajrat.
  • Funding incremental working capital requirements of the company.
  • Repayment and/or pre-payment, in full and/or part, of certain borrowings of the company.
  • General corporate purposes.
 
Investment Rationale:

A well-diversified product portfolio mix

Since its incorporation, DCGL has focused on diversifying its product portfolio mix and is a manufacturer of agrochemical products in various categories such as insecticides, fungicides, herbicides, plant growth regulators, micro fertilizers, and antibiotics. Additionally, the company is involved in manufacturing and selling general insect and pest control chemicals for Public Health and Animal Health protection. Thus, the company’s move to develop a niche and diversified product portfolio of agrochemicals has enabled it to de-risk business operations.

Strong domestic and global pesticides demand

Indian pesticides and other agrochemicals market grew at a CAGR of 4.5% from ₹368 billion in 2013- 14 to ₹439 billion in 2017-18. Going forward, the overall Indian pesticides and other agrochemicals industry is estimated to increase at a CAGR of 7.5%-8.5% by 2026-27. The expected traction in international markets and an increase in domestic usage of pesticides in India will benefit the company’s revenues. Additionally, an opportunity amounting to around USD 5 billion going off-patent in pesticides in 2026-27 provides ample room for Indian manufacturers to increase their pesticide exports. The industry tailwinds coupled with a superior product mix and strong R&D capabilities are likely to aid Dharmaj Crop Guard’s business performance going forward.
Valuation and Outlook:
The company aims to further diversify its customer base and increase its market share in the agrochemical business. To achieve this goal, the company focuses on strengthening its business through effective branding of its own products and acquiring other brands to grow its product portfolio mix. Moreover, the set-up of the new factory will enhance the manufacturing capabilities of the business and lead to better profit margins due to backward integration. However, a low level of capacity utilization of around 35% in FY2022 remains a key concern for the business. On the upper end of the price band, the issue is valued at a P/E of 20.4x based on FY2022 earnings which we feel is fairly priced. Hence, we recommend a “SUBSCRIBE” rating for the benefit of listing gains.

Keystone Realtors Ltd : SUBSCRIBE

Keystone Realtors Ltd : SUBSCRIBE
  • Date

    14 Nov 2022 - 16 Nov 2022

  • Price Range

    ₹514 - ₹541

  • Minimum Order Quantity

    27

  • (D) RHP

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Keystone Realtors Ltd. was established in 1995 to develop itself as a trusted brand in delivering multiple high-end award-winning buildings, gated communities, and townships. The company has become one of the prominent real estate developers (in terms of absorption in the number of units) in the micro markets where they are present. It has a diversified suite of projects across a wide range of price points, and a presence in several micro markets. Keystone has its major focus on “Mumbai Metropolitan Region” (MMR) where it offers a comprehensive range of projects under the affordable, mid and mass, aspirational, premium, and super premium categories, all under the “Rustomjee” brand. The company command’s a market share of 28% in Khar, 23% market in Juhu, 11% in Bandra East, 14% in Virar, 3% in Thane, and 5% in Bhandup in terms of absorption (in units) from 2017 to 2021 (Source: Anarock Report). As of June 30, 2022, Keystone has developed 20.22 million square feet of high-value and affordable residential buildings, premium gated estates, townships, corporate parks, retail spaces, schools, iconic landmarks, and various other real estate projects. The company’s business model is entering into joint development agreements, redevelopment agreements with landowners or developers, or societies, and slum rehabilitation projects, which require lower upfront capital investment compared to the direct acquisition of land parcels. This approach allows the company to minimize the upfront capital expenditure compared to the direct acquisition of land parcels, which ensures that their capital allocation is balanced and calibrated, allowing them to generate revenue with lower initial investments
Objects of the issue:
The IPO proceeds of the fresh issue will be used towards the following purposes:
  • Repayment/ prepayment, in full or part, of certain borrowings availed by our Company and/or certain of our Subsidiaries
  • Funding acquisition of future real estate projects and general corporate purposes.
 
Investment Rationale:

Well-established customer-centric brand in the Mumbai Metropolitan Region

Keystone Realtors Ltd. is one of the prominent real estate developers (in terms of absorption in the number of units) in the micro markets that we are present in, namely Juhu, Bandra East, Khar, Bhandup, Virar, and Thane (Source: Anarock Report), and it has been able to garner premium pricing in the MMR micro-markets where most of their projects are located. As of June 30, 2022, they had 32 Completed Projects, 12 Ongoing Projects, and 21 Forthcoming Projects across the MMR, including a comprehensive range of projects under the affordable, mid and mass, aspirational, premium, and super premium categories, all under Rustomjee brand. The Company has undertaken several landmark projects in the MMR, which include Rustomjee Elements, a large gated community in Upper Juhu, Mumbai; Rustomjee Paramount, a signature complex in Khar, Mumbai; Rustomjee Seasons, 3.82 acres gated community in Bandra Annexe, Mumbai; Rustomjee Crown, a 5.75 acres land parcel for high-end development at Prabhadevi, South Mumbai, consisting of three high-rise towers.
Keystone has developed a strong brand that has encouraged stakeholders in the real estate development industry to prefer partnering with the company, in particular for re-development and stalled projects. The company’s customer-centric approach has led to them providing offerings posthandover and post-development services such as providing furnishing, interior designing and execution services, addressing miscellaneous customer needs such as leasing out apartments and managing lease renewals and maintenance, as well as facility management services.

Asset-light and scalable model resulting in profitability and stable financial performance

The hospitals that the company has built are on a large-scale basis. Its flagship hospital in Gurugram has a built-up structure of more than 2 million. The company’s hospitals are built to install additional beds without any significant investment. The hospital has an installed bed capacity of 473 beds as of June 30, 2022, with a further capacity to accommodate over 900 beds. The hospitals also have an international-grade infrastructure. Across all the hospitals 30% are dedicated to critical care and the chain has a total of 70 OPDs. The company is also focusing on diversification into new services like digital health. The company has scaled up its telemedicine and remote delivery of healthcare services.
Valuation and Outlook:

Keystone Realtors Limited (Keystone), the brand known as Rustomjee, is a significant player in the real estate industry. They have experience in developing lifestyle projects, high-value standalone buildings, gated communities, fully integrated townships, re-developments, and stalled projects. As of
June 30, 2022, they had 1,542 channel partners who present the Rustomjee portfolio to their customers and drive customer traffic to our projects. In addition to its in-house competencies, the company also leverages the expertise of external specialists to match its wide range of product offerings. The residential real estate sector in India has witnessed several changes in market conditions because of demonetization, the NBFC liquidity crisis of 2018, and the implementation of RERA and GST in this
period. The overall effect is that the sector has moved towards more transparency and being more organized than in years earlier when these reforms were taking place. The company has been aggressively reducing debt and has successfully brought down its net debt-to-equity ratio from 7.7x in FY20 to 1.1x as of June 30, 2022. The company is expected to partially utilize the IPO fund to reduce the debt on the books further while balancing its new projects in the pipeline. However, a rise in interest rates, an economic slowdown in India due to macro factors such as Inflation, and too much dependency of the company on a particular region remains the risk concern. On the upper end of the price band, the issue is valued at a P/E of 38.8x based on FY22 earnings which we feel is fairly priced as it has RONW of 15% as on FY22 which is the highest amongst peers as per RHP and we, therefore, recommend to “SUBSCRIBE” to the IPO.

 

Global Health Ltd : Subscribe for Listing Gains

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Global Health Ltd : Subscribe for Listing Gains
  • Date

    03 Nov 2022 - 07 Nov 2022

  • Price Range

    ₹319 - ₹336

  • Minimum Order Quantity

    44

  • (D) RHP

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Global Health Limited is one of the largest private multi-speciality tertiary care providers operating in the North and East regions of India. It has five hospitals currently in operation located in Gurugram, Lucknow, Indore, Ranchi and Patna and the sixth hospital is under construction in Noida. The hospitals operate under the “Medanta” brand. The company has key specialities in cardiology and cardiac sciences, neurosciences, oncology, digestive and hepatobiliary sciences, orthopaedics, liver transplant, and kidney and urology. The company provides healthcare services in over 30 specialities and engages over 1300 doctors and has 2467 beds across its operational hospitals. The company’s flagship hospital in Grurgram is approximately 2.7mn sq ft with 1391 installed beds as of 30th June 2022. It also operates six multi-speciality clinics in DLF Cybercity Gurugram, Delhi Airport, South Delhi, Darbhanga, Patna and Subhash Chowk Gurugram. Upon completion of the hospital in Noida, the company expects the number of beds to exceed 3500 at the end of Fiscal 2025. The company also provides home care service which provides sample collection, delivery of medicine, preventive health checks, paediatric vaccinations and nursing services.
Objects of the issue:
The IPO proceeds of the fresh issue will be used towards the following purposes:
  • Repayment/prepayment of borrowings, in full or part, of the Subsidiaries, GHPPL and MHPL
  • General Corporate Purposes
Investment Rationale:

Clinical Expertise and Focus on Clinical Research

The company focuses on super specialization and clinical expertise by working on a high number of complex cases. The company has a doctor-led management model enabling sub-specialisation to provide the highest level of clinical expertise to the patients. It also has a research facility “The Medanta Institutional Tissue Repository” in 2017 to promote biomarker and other tissue-based research. The company is currently developing an algorithm to increase productivity and accuracy in medical diagnosis, particularly in radiology scans.

Large-scale hospitals with sophisticated infrastructure and steady growth strategies

The hospitals that the company has built are on a large-scale basis. Its flagship hospital in Gurugram has a built-up structure of more than 2 million. The company’s hospitals are built to install additional beds without any significant investment. The hospital has an installed bed capacity of 473 beds as of June 30, 2022, with a further capacity to accommodate over 900 beds. The hospitals also have an international-grade infrastructure. Across all the hospitals 30% are dedicated to critical care and the chain has a total of 70 OPDs. The company is also focusing on diversification into new services like digital health. The company has scaled up its telemedicine and remote delivery of healthcare services.
Valuation and Outlook:
There is huge growth in the healthcare sector and the super specialization market in India is highly under-penetrated. This puts Global Health (Medanta) in a strong position to further grow and expand into different geographies. The company also has steady ARPOB and EBITDA levels through the fiscal years 2020, 2021 and 2022. The company primarily focuses on under-penetrated and underserved geographies with dense populations and government schemes such as Ayushman Bharat Scheme present the company to expand in such under-served areas to reach the low-income population. However, the company’s subsidiaries GHPPL and MHPL have incurred losses and medical and legal risks remain the key risk facts. On the upper end of the price band, the issue is valued at a P/E of 43.2x based on FY22 earnings which we feel is fairly priced and we, therefore, recommend to “SUBSCRIBE” the IPO for the benefit of listing gains.