Showing posts with label IPO ANALYSIS: SHEELA FOAM LIMITED – INVEST FOR LISTING GAINS. Show all posts
Showing posts with label IPO ANALYSIS: SHEELA FOAM LIMITED – INVEST FOR LISTING GAINS. Show all posts

Monday, November 28, 2016

IPO ANALYSIS: SHEELA FOAM LIMITED – INVEST FOR LISTING GAINS


ISSUE DETAILS

ISSUE OPENS / CLOSES ON

29-11/01-12-2016
ISSUE SIZE / OFS

75,00,000 EQUITY SHARES
FACE VALUE
RS 5
PRICE BAND
RS 680-730

BUSINESS
Mfrs   / exporters of mattresses and comfort accessories / foam / lamination

PROMOTERS
SHEELA GAUTAM, RAHUL GAUTAM
LISTINGS
BSE, NSE

BRLMs
ICICI SEC, EDELWEISS FINANCIAL SEVICES
REGISTRAR
LINK IN TIME
IPO GRADE
NA

BUSINESS:

Sheela Foam is one of the leading manufacturers of mattresses and technical PU Foam in the country. Currently it owns and operates 11 manufacturing facilities. Sheela Foam sells mattresses under the brand ‘Sleepwell’.

Sheela Foam has developed a pan-India distribution network that consists of over 100 exclusive distributors, over 2,000 exclusive retail dealers and over 2,500 multi-brand outlets, as on September 30, 2016. The home comfort products are sold to retail end-consumers through exclusive distributors.

OBJECTS OF THE OFFER:

The objects of the Offer are to achieve the benefits of listing the Equity Shares on the Stock Exchanges.
The company will be offering up to 75 lac shares (at the lower end of the IPO).

FINANCIALS:

 (RS IN CRORES)

31-03-2015
31-03-2016
30-09-2016
(6 Months)
CAPITAL
16.26
16.26
24.39
REVENUES / TOTAL INCOME

1428

1567

804
NET PROFIT
43
105
66
EPS
8.75
21.48
13.52
RONW (%)
17
31
16

RISKS:
1. Demonetization effect: Slowdown in the real estate sector will affect the performance of the company.

2. Risks associated with the single product / segment.

3. Change in customer preferences / needs.

4. Increasing debtors’ level - For the Fiscal Year 2016 and the six months ended September 30, 2016, the trade receivables were Rs 117 cr and Rs 134 cr respectively, which constituted 7.47% and 16.65%, respectively, of the total revenues for the same periods.

5. Fluctuation in currency – Certain grades of polyols are imported.

6. The company had delayed payments of statutory dues in the past.

7. Faces stiff competition both from the organised and unorganized players in the market — Kurl-on, Duroflex and Coirfoam besides a few international brands.

STRENGTHS:

1. Well recognized and established brand.
2. Extensive and well developed pan-India sales and distribution network.
3. Quality manufacturing capabilities.
4. Integrated operations and economies of scale.

VALUATION AND RECOMMENDATIONS:

The offer is around 27PE, based FY 17 earnings, which is reasonable. However one should take the earnings of the previous year and current year with a pinch of salt. The net profit margin which was at 3% in FY15 has gone to 6.7% in FY 16 and well beyond 8 percent in the current financial year. BRLMs have to clarify for this kind of jack up of margins in the IPO bound year. Debtors levels are have gone up substantially in the last 12-15 months indicating either ‘manufactured sales’ or less demand for the products.

According to CRISIL the organised market in mattresses in India constitutes around 35 per cent of the total market and is growing at a faster pace, thanks to increasing preference for branded products among consumers. Sleepwell holds 20-23 per cent market share in the organised segment.
Considering high percentage of promoters holding, (post IPO the promoters will hold around 70 percent), there could be listing gains.
INVEST FOR LISTING GAINS.