| Post-Snapshot: Laxmi Goldorna extended IPO closing date by five working days, from March 26 to April 3, 2020 via advertisement. |
Glitter is just in name and not in character! Having four statutory auditors in one and a half years speaks loud and clear.
|
OFFER AT A GLANCE |
|
|
Name |
Laxmi Goldorna House Ltd |
|
Offer Amount |
Rs 8.28 cr |
|
Offer Quantity |
55.20 lakh shares of Rs 10 each |
|
Offer on Total Equity |
26.45% |
|
Post-issue Promoter stake |
73.54% |
|
Post-IPO Capital |
Rs 20.87 cr |
|
Offer Price |
Rs 15 |
|
Minimum Application Qty |
8000 |
|
Offer Opens |
March 20, 2020 |
|
Offer Closes |
March 26, 2020 |
|
Listing |
SME Platform of NSE |
|
Rating |
Nil |
|
Lead Manager |
Beeline Broking |
|
Market Maker |
Beeline Broking |
|
Underwriter |
Beeline Broking (100%) |
|
Registrar |
Kfin Technologies |
The Offer
The present offer is an initial public issue of 55,20,000 equity shares of face value of Rs 10 at a price of Rs 15 a piece aggregating to Rs 828 lakh. Of this, 2,88,000 shares (Rs 42.20 lakh) are reserved for the Market Maker. The offer constitutes 26.45% of the company’s post-issue paid up equity share capital of Rs 20.87 cr. The promoters and their group would hold 73.54% in the enlarged capital.
This fixed price offer is proposed to be listed on the SME platform of NSE. Investors should apply for a minimum quantity of 8000 shares (Rs 1,20,000). The issue manager, Ahmedabad-based Beeline Broking, who has underwritten the entire issue amount, is also acting as a Market Maker to the issue.
Issue Object
Of the IPO proceeds, Rs 40 lakh (4.8%) is budgeted for issue related expenses. As much as Rs 700 lakh (84.5%) is earmarked for working capital and the balance Rs 88 lakh (10.6%) is reserved for general corporate purpose.
Issuer Background
The Ahmedabad-based Laxmi Goldorna House Ltd (LGHL), promoted in January 2010 by Jayesh Chinubhai Shah (44) and his wife Rupalben Shah, had in fact filed its public issue draft prospectus in July 2018. At that time the company had asked for a premium of Rs 15 per share and intended to raise Rs 13.80 cr from the primary market. For reasons best known only to the company and the regulators, it took 20 long months for LGHL to float the IPO. Normally, a gap of more than one and a half years would have enabled any issuer to revise its issue price upward. But, LGHL has pruned the premium from Rs 15 to Rs 5 and the IPO size has been reduced to Rs 8.28 cr!
Meanwhile, LGHL’s group company, Sona Hi Sona Jewellers (Gujarat) Ltd, which was actually registered a month later than the former, in February 2010, filed its IPO prospectus in July 2019 for raising Rs 4.50 cr at par value and completed the same in October 2019. According to its offer document, Sona Hi Sona was promoted by Jayesh Shah’s brother Vijay Shah (37) and his wife Alpaben Shah. Interestingly, while LGHL claims Sona Hi Sona as group company in the IPO document, the latter’s offer document did not reveal its connection with LGHL!
Coming to the financial track record, both the companies are engaged in related line of business – trading of gold jewellery and ornaments and both of them seem to have similar size of operations. However, in terms of profitability, both have very thin bottom line as compared to their relatively large equity base. LGHL netted a profit of around Rs 67 lakh in FY19 on a turnover of more than Rs 73 cr against its existing equity base of Rs 15.35 cr. Same year, on a turnover of more than Rs 67 cr, Sona netted a profit of less than Rs 39 lakh against its post-IPO equity base of Rs 16.79 cr.
|
(Amt in lakh) |
Laxmi Goldorna |
Sona Hi Sona |
||||
|
YEAR ENDED |
31-Mar-19 |
31-Mar-18 |
31-Mar-17 |
31-Mar-19 |
31-Mar-18 |
31-Mar-17 |
|
MONTHS |
12 |
12 |
12 |
12 |
12 |
12 |
|
OPERATING REVENUE |
7341.78 |
6977.12 |
5147.52 |
6717.98 |
5903.12 |
5448 |
|
OTHER INCOME |
3.19 |
0.13 |
95.00 |
0.00 |
0.14 |
0.10 |
|
EBITDA |
275.03 |
160.17 |
142.67 |
209.9 |
151.64 |
97.27 |
|
OPM% |
3.7 |
2.3 |
0.9 |
3.1 |
2.6 |
1.8 |
|
INTEREST |
183.71 |
99.19 |
36.81 |
153.32 |
116.18 |
84.31 |
|
DEPRECIATION |
1.76 |
1.86 |
1.88 |
3.57 |
3.61 |
3.69 |
|
NET PROFIT |
66.81 |
44.05 |
58.05 |
38.84 |
18.63 |
6.17 |
|
EQUITY |
1535.19 |
1535.19 |
66.45 |
728.54 |
728.54 |
79.97 |
|
EQUITY PENDING |
2087.19 |
1535.19 |
66.45 |
1678.54 |
728.54 |
79.97 |
|
RESERVES |
746.20 |
679.38 |
373.62 |
248.28 |
209.43 |
384.66 |
|
RESERVES PENDING |
1022.20 |
679.38 |
373.62 |
423.28 |
209.43 |
384.66 |
Valuation
Group company Sona, which has been listed for five months, was last traded at Rs 14 which discounts the company’s last full year’s earnings (23 paise per share) more than 60 times. LGHL’s FY19 bottom line yields an EPS of 32 paise on its post-IPO equity of Rs 20.87 cr which discounts the offer price nearly 47 times.
Both the valuations look absurd when compared to their credentials. Moreover, Sona’s liquidity record makes its valuation null and void as more than two out of three days the scrip does not find a quote!
Sona Hi Sona Liquidity
|
MONTH |
WORK |
TRADE |
Liquid % |
|
Oct-19 |
12 |
10 |
83.3 |
|
Nov-19 |
20 |
9 |
45.0 |
|
Dec-19 |
21 |
2 |
9.5 |
|
Jan-20 |
23 |
9 |
39.1 |
|
Feb-20 |
20 |
4 |
20.0 |
|
Mar-20 |
13 |
0 |
0.0 |
|
109 |
34 |
31.2 |
Perception & Concern
It is very strange that both Sona and LGHL have decided to offer shares to public at a rate much lower than the price at which they issued shares for conversion of unsecured loans more than two years earlier.
It is also interesting to note that Sona issued a 4:1 bonus in July 2017 and LGHL came out with its bonus in similar ratio a month later, in August 2017. Post-bonus, Sona converted unsecured loans in July 2017 at a price of Rs 62 per share whereas LGHL converted unsecured loans in September 2017 at a price of Rs 58 a share.
Both the companies had made preferential allotments to entities like Pioneer Mechantile Ltd, Arcadia Mercantile Ltd, Tripada Infrastructure Private Ltd, among others whose identities are not revealed.
What’s more, LGHL has changed its statutory auditors thrice in just one and a half year and in the same month auditors were changed twice! On September 16, 2017 Dipesh Chokshi & Co resigned and Parth Shah and Associates took over. On the last day of the month, Parth Shah resigned and Hemang Shah & Co were appointed. In March 2019, the company’s previous `peer review auditor’, Bhagat & Co., took over as statutory auditors. Interestingly, in all the occasions, the auditors resigned due to `pre-occupation’! So much is the credibility of the auditors!!
Market Maker Track
LGHL’s market maker Beeline Broking has an unenviable record in market making. Almost every IPO dealt by Beeline till 2019 have failed to provide the liquidity prescribed by SEBI Regulations. Beeline has undertaken the job of market making in 32 SME IPOs since 2017 of which 31 are listed. Overall, the market maker was able to provide less than 45% liquidity as against the prescribed 75%.
Beeline’s track record as Market Maker
|
CO_NAME |
IPO DATE |
DAYS |
DAYS |
Liquid% |
|
Shree Kris Infr |
15-Nov-18 |
321 |
22 |
6.9 |
|
Gautam Gem |
24-Jan-18 |
521 |
119 |
22.8 |
|
Siddharth Edu |
29-Sep-17 |
602 |
144 |
23.9 |
|
Ridings Consult |
14-Mar-18 |
490 |
128 |
26.1 |
|
Palm Jewel |
25-May-18 |
437 |
114 |
26.1 |
|
Shubham Polys |
28-Sep-18 |
354 |
99 |
28.0 |
|
Ranjeet Mechat |
12-Sep-18 |
365 |
110 |
30.1 |
|
Riddhi Corp |
12-Jun-17 |
678 |
207 |
30.5 |
|
Megastar Food |
14-May-18 |
450 |
143 |
31.8 |
|
Solex Energy |
23-Jan-18 |
523 |
172 |
32.9 |
|
Milton Ind |
29-Sep-17 |
600 |
199 |
33.2 |
|
Sikko Indus |
5-Apr-17 |
724 |
250 |
34.5 |
|
Shish Ind |
23-Aug-17 |
628 |
217 |
34.6 |
|
Sharika Enter |
15-Nov-17 |
571 |
232 |
40.6 |
|
Synergy Green |
4-Sep-18 |
368 |
151 |
41.0 |
|
Novateor |
30-Aug-19 |
129 |
54 |
41.9 |
|
Narmada Agro |
28-Mar-18 |
474 |
202 |
42.6 |
|
Axita Cotton |
27-Dec-18 |
294 |
127 |
43.2 |
|
CRP Risk Mgmt |
18-Jan-18 |
526 |
276 |
52.5 |
|
Zodiac Energy |
23-Nov-17 |
565 |
317 |
56.1 |
|
Inflame Appli |
6-Mar-18 |
496 |
294 |
59.3 |
|
Ratnabhumi Dev |
4-Dec-17 |
558 |
337 |
60.4 |
|
Transwind Infra |
30-Jun-17 |
665 |
411 |
61.8 |
|
Indo US Bio |
30-Apr-18 |
459 |
291 |
63.4 |
|
Bright Solar |
26-Jun-18 |
418 |
266 |
63.6 |
|
Touchwood Ent |
11-Dec-17 |
553 |
352 |
63.7 |
|
Reliable Data |
27-Sep-17 |
603 |
403 |
66.8 |
|
Innovana Think |
29-Nov-17 |
560 |
392 |
70.0 |
|
Silver Touch |
20-Nov-17 |
567 |
424 |
74.8 |
|
ICL Organic |
31-Jan-20 |
22 |
20 |
90.9 |
|
Chandra Bhagat |
31-Jan-20 |
23 |
21 |
91.3 |
|
14544 |
6494 |
44.7 |
Lead Manager Track
Market Maker Beeline has a mixed record as an issue manager. It reportedly managed four IPOs in last two years of which two of the 2018 issues are quoting at a premium. Nevertheless, the recent one is languishing at a discount.
|
Issuer Name |
IPO DATE |
IPO |
CURRENT |
GAIN |
% |
|
Chandra Bhagat |
31-Jan-20 |
10.20 |
7.60 |
-2.60 |
-25.5 |
|
Axita Cotton |
27-Dec-18 |
10.51 |
15.77 |
5.26 |
50.0 |
|
Shubham Polys |
28-Sep-18 |
6.00 |
9.95 |
3.95 |
65.8 |
|
Ranjeet Mechat |
12-Sep-18 |
4.50 |
4.02 |
-0.48 |
-10.6 |