Raw Edge Industrial Solutions Limited

Started in 2005, Mumbai based Raw Edge Industrial Solutions Limited is a company engaged in the business of providing industrial minerals to manufacturing industries at competitive prices. The company is delivering fully integrated solutions of Raw Material supplies to large and medium industrial houses. It is one of the leading Manufacturers and Suppliers of a quality range of Calcined Lime, Dolomitic Lime, Hydrated Lime, AAC Lime, Calcined Magnesite, Clinker, Quartz, Gypsum, Imported Coal, etc. In February 2018, the company has entered into an agreement for sale for acquiring agriculture land of '50.21 Lakhs at Surat for setting up a manufacturing unit of crushed Quick Lime and Hydrated Lime with an installed capacity of 1,20,000 MT/per annum. In addition to its existing capacity of 60,000 ton/per annum capacity plant which is to be shifted at the aforesaid new premises will be making the total installed capacity of 1,80,000 ton/per annum. Company's capacity utilisation for FY1718 is 88.56%.  Though the customers of Raw Edge are spread over 10 states, the major supply of its products are concentrated in the state of Gujarat and Rajasthan (contributing 91.37 % of total turnover). The company has 33 permanent employees on its payroll. As per financial performance, company has posted total income/net profits of Rs. 66.62 cr. / Rs. 0.82 cr. (FY13), Rs. 33.50 cr. / Rs. 0.70 cr. (FY14), Rs. 38.26 cr. / Rs. 0.45 cr. (FY15), Rs. 41.34 cr. / Rs. 0.58 cr. (FY16) and Rs. 48.61 cr. / Rs. 0.62 cr. (FY17). For the period upto 31.01.18 of FY18, it has earned net profit of Rs. 1.33 cr. on a turnover of Rs. 44.99 cr. Sudden increase in bottom-line generates doubts for sustainability. For last three fiscals, it has posted an average EPS of Rs 7.21 and an average RoNW of 10.15%. Issue is priced at P/BV of 3.07 based on its post issue NAV of 23.46. If we annualise latest net profit of FY18 and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 37.70. As per RHP, it has shown Sanginita Chemicals Limited, India Gelatin and Chemicals Limited and Meghmani Organics Limited as peers which are trading at P/E of 140, 28.90 and 12.02 as on 03.07.2018. So issue looks aggressively priced. On BRLM's front, for Guiness Corporate Advisors Pvt. Ltd, this is the 26th IPO and from last 10 IPOs, all with 1% to 20% premium on the day of listing. As of now, from recent 10 IPOs, 5 are trading below issue price and remaining above issue price. ( As on 03.07.18 ) As per financials, company's has shown improvement in performance after sudden fall in top-line since FY13, RoNW is 10.15% for last three fiscals and issue is aggressively priced as per latest earnings. Performance of BRLM looks good, but most IPOs which listed above issue price are trading below issue price. So we give AVOID rating to this SME IPO as per current market situation.

• 1 Mr. Bimal Rajkumar Bansal
• 2 Mr. Sourabh Bimal Bansal
• 3 Mr. Siddharth Bimal Bansal