Started in 1982, Gwalior, Madhya Pradesh based Aartech Solonics Limited is a system solution oriented R&D enterprise in the field of specialized and selected energy appliances. It is involved in the manufacturing of electricity distribution & control apparatus [electrical apparatus for switching or protecting electrical circuits (e.g. switches, fuses, voltage limiters, surge suppressors, junction boxes etc.) for a voltage exceeding 1000 volts; similar apparatus (including relays, sockets etc.) for a voltage not exceeding 1000 volts; boards, panels, consoles, cabinets and other bases equipped with two or more of the above apparatus for electricity control or distribution of electricity including power capacitors. Some of the company's popular products and services include-1. BTS - 2000.2. Kranking Ultra Capacitors.3. Control Rely Panels.4. Load Checkers. The company also provide solutions and services for products of other companies like- 1. GSUN Innovations2. Bestcase Enclosures The company's client base includes businesses from various industries like Defence, Railways, Power Generation, Heavy Earth Moving Equipments and Oil & Gas etc. Aartech's Innovations Lab is a 1000 sqft facility with all modern amenities required for laboratory operations. In November 2013, it was recognized by the Department of Science and Technology for its contribution in the field for R&D activities. The company has 55 full-time employees excluding 10 contract employees. On financial performance front, for last three fiscals ASL has (on standalone basis) posted turnover/net profits of Rs. 10.26 cr. / Rs. 0.23 cr. (FY16), Rs. 13.42cr. / Rs. 0.30 cr. (FY17) and Rs. 12.09 cr. / Rs. 1.18 cr. (FY18). For first half of FY19, it has earned net profit of Rs. 0.60 cr. on a turnover of Rs. 4.17 cr. Thus sudden sump is bottom line for last one and half year is a bit surprising and raises concern. While on consolidated basis offer document has reported net profit of Rs. 0.76 cr. on a turnover of Rs. 11.10 cr. for FY18 and net profit of Rs. 0.30 cr. on a turnover of Rs. 4.14 cr. For last three fiscals it has posted an average EPS of 1.47 and average RoNW of 4.11% (on standalone basis). For FY18 on a consolidated basis it has posted an average EPS of Rs. 0.74 and an average RoNW of 2.16%. Issue is priced at a P/BV of 0.94 on the basis of consolidated NAV of Rs. 36.01 as on 30.09.18 and at a P/BV of 0.96 on the basis of consolidated post issue NAV of Rs. 35.41. If we annualise latest (consolidated) earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 40 making it aggressively priced offer. On standalone basis too the asking price is at a P/E of around 20. As per offer documents it has shown Star Delta and Transformers & Rectifiers as its listed peers who are currently trading at a P/Es of around 6 and 25 (as on 16.02.19 closing). However, they are not strictly comparable. On BRLM's front, for Swastika Investmart Limited this is the 18th SME IPO. For last 10 IPOs, 2 opened below issue price and remaining above issue price. Currently from last 10 IPOs, 4 is trading below issue price and remaining 6 above issue price. ( As on 18.02.19 ) As per financials performance is average, RoNW is 4.11% and issue looks very highly priced with respect to current earnings on consolidated earnings. Sudden jump in bottom-line in FY18 and H1 of FY19 is surprising. Performance of BRLM is average. So we give AVOID rating to this SME IPO.
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