Started in 2005, Manorama Industries Limited is engaged in manufacturing, processing and supply of exotic and specialty fats & oils like Sal butter, Sal fat, Sal oil, Sal Stearine, Sal olein, Mango butter, Mango fat, Mango oil, Mango Stearine, Kokum butter, Kokum oil, Mowrah fat, and several value added tailor made products. Currently, Manorama among the leading manufacturers of Sal Oils and Stearine globally with an annual production of 3,000-4,000 tonnes. Globally, they are amongst the top 10 manufacturers of Stearine. [as per CARE Industry Report]. Manorama is majorly catering to chocolate and cosmetic industry. Company's product stearine which is made out of sal or mango seeds is one of the key ingredients in the manufacturing of Cocoa Butter Equivalents (CBE), which has a demand in the Chocolate Industry. Further the product olein is generally demanded in cosmetic industry. They have also entered into an agreement with one of the leading chocolate manufacturers for supply of CBE for a period of two year from 2018. As on date of the RHP, they have an order book to supply CBE worth Rs. 76.80 Cr over a period of two years from April, 2018. The key source of raw material is Sal seeds which are sourced from tribals living in Sal forests in Chhattisgarh, Jharkhand, Orissa & parts of Madhya Pradesh. Company has an established network in more than 18,000 villages in the states of Chhattisgarh, Jharkhand, Orissa, Madhya Pradesh, etc. Company also procures raw materials from forest departments and local markets if required. MIL is supplying its products both in domestic and export markets. They have also been recognised as Star Export House by Government of India. Domestically, they majorly supply in Maharashtra, Gujarat, etc. and internationally, they mainly supply their products in countries like Japan, Italy, Malaysia, Indonesia, Singapore, Netherlands, Germany, Sweden, Denmark and UK. Some of customers are large global chocolate/CBE manufacturers like Ferrero (Italy), Ferrero (India), Ferrero (Singapore), Mitsui (Japan), Unigra (Italy), Walter Rau (Germany), Adeka Corporation (Japan), IOI (Malaysia), Fuji Oil (Singapore), etc. They have also entered into a supply agreement with The Body Shop International Ltd. (U.K.) for supply of Mango Butter. They have been supplying oleins & fats which have been used by other leading cosmetic companies like L’oreal, Hallstar (USA), Jedward International INC (USA), Stearinerie Dubois FILS, France, etc. As on March 31, 2018, MIL has 66 employees on payroll. As per financial performance, MIL has posted total income/net profits of Rs. 105.32 cr. / Rs. 0.89 cr. (FY14), Rs. 133.43 cr. / Rs. 0.94 cr. (FY15), Rs. 131.69 cr. / Rs. 1.08 cr. (FY16), Rs. 146.38 cr. / Rs. 1.37 cr. (FY17) and Rs. 221.89 cr. / Rs. 10.36 cr. (FY18). So company has shown growth in top-line and bottom-line, but sudden jump in FY18 bottom-line raises concerns. As per company increase in trading resulted in higher top-line and increase in profit was due to reduction in raw material cost and increase in oil yield recovery. Trade receivables are very low compared to total revenue. For last three fiscals it has posted an average EPS of Rs. 7.72 and an average RoNW of 25.52%. Issue is priced at a P/BV of 5.74 on the basis of NAV of Rs. 32.75 as on 31.03.18. If we consider latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 20.20 and there is no listed peers as per RHP. On BRLM's front, for Pantomath Capital Advisors Private Limited this is the 81st IPO. From last 10 IPOs, 1 at par and remaining above issue price with 1 to 10% premium. As of now, from last 10 IPOs, 3 are trading below issue price and remaining above issue price. ( As on 18.09.18 ) Company has shown growth (but bottom-line remained almost constant and than sudden jump in FY18), RoNW is 25.52% and issue is fully priced. Company has very less competition and there is good growth opportunity once new manufacturing unit will be operational. Performance of BRLM is good. So we give NEUTRAL rating to this SME IPO.
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