Suich Industries Limited IPO

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(i) The business was started by Gunnit Singh Allagh and Sanchit Allagh as a wholesale trading and distribution concern for mobile and mobile accessories in New Delhi, India. After gaining experience and foreseeing the opportunity in the Indian mobile market, they incorporated the Company in 2008 initially for
manufacturing of mobile phone batteries and mobile phone chargers.

(ii) To reap the benefits of tax incentives, they strategically purchased land and set up a manufacturing facility at State Infrastructure and Industrial Development Corporation of Uttarakhand Limited (SIIDCUL) in Haridwar, Uttarakhand spread over an area of 7,500 sq. meters.

(iii) The Company through its subsidiary as well as individually imports the parts and equipment from China and assemble them at their manufacturing facility situated at Haridwar.

(iv) In 2012, to expand its portfolio the company launched mobile power bank. Further, leveraging their experience in the industry, the company started manufacturing newer variants of Power banks 7,500 mAH and 10,000 mAH and launched feature mobile phones in 2014.

(v) In 2016, to become a consumer electronics based Company, they launched Light Emitting Diode (LED) TV sets in 2016.
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(vi) Since inception, the company has focussed on selling the products to Northern India specifically catering to rural areas and Tier-2 and Tier-3 cities where feature mobile phones and mobile phone accessories are easily marketable.

(vii) They have strived to keep themselves an asset-light and accordingly, they sell the entire products directly to the wide distributor’s network avoiding the need of setting up own retail outlets.

Products of the Company

The Company assembles and markets these products under its own brand name, “Suich”

Objects of the Suich Industries Limited IPO:

1. Repayment/ pre-payment of certain unsecured loans availed from banks and financial institutions by the company. 2. Funding the working capital requirement of the Company. 3. General corporate purposes.

Suich Industries Limited IPO Details:

Open Date: May 30 2019
Close Date: Jun 04 2019
Total Shares: 41,15,200
Face Value: ₹ 10 Per Equity Share
Issue Type: Book Building
Issue Size: 30.86 Cr.
Lot Size: 1600 Shares
Issue Price: ₹ 73-75 Per Equity Share
Listing At: BSE SME
Listing Date: May 14 2019

Company Business:

The Company’s primary business comprises of assembling of Mobile phone battery, Mobile Phone, Mobile Charger, LED TV and other mobile accessories.

Financials of Suich Industries Limited IPO:

1. The Company's Profit gets doubled from 2016 to 2018. It has gone up from 100 Cr to 200 Cr. However, if you see the above image the company's Profit gets doubled in the last 2 years on almost constant revenue. They are doing the business in a very competitive environment so this much jump looks quite surreal. 2. Total Outstanding shares after IPO would be 1,52,44,200. 3. The EPS based on annualizing the skeptical 9MFY18 financials would be 9.62. So the asking P/E multiple is 7.79x. However, if you take the Average profit of the last 3 years and divide with the number of shares outstanding after IPO, the EPS would be 3.55 and P/E multiple would be 21.04.

Comparison With Peers:

As per DRHP, the Dixon Technologies has shown as peers but it can't be compared with it in the strict term due to following reasons: Dixon offer end to end product solutions under two business models, i.e., the OEM and ODM. Under the OEM model, they provide services ranging from global sourcing, manufacturing, quality testing and packaging to logistics to OEMs across the product verticals. Under the ODM model, they develop and design products in-house at their R&D center and then undertake the manufacture and supply of these products to companies in India who in turn distribute these products under their own brands. However, Suich Industries is not truly manufacturing any product but rather importing material from China and assembling it and then selling it under "Suich" Brand.

Recommendation on Suich Industries Limited IPO:

Review and Recommendation of Suich Industries Limited IPO from IZ Team are 2/10. [The Issue is asking a P/E multiple of 21x based on Average PAT of last 3 years, which looks stretched. We have taken the last 3 years average PAT as 9MFY18 earnings look skeptical as already discussed. The company is working in a very competitive environment so going forward do not expect much improvement in the margins. The company is not a true manufacturing company. They are more of assembler. So moat is less. The positive is Pantomath as LM. Can be looked depending upon the subscription figure.  ]

Lead Manager of Suich Industries Limited IPO:

  1. Pantomath Capital Advisors Private Limited

Registrar of Suich Industries Limited IPO:

  1. Link Intime India Private Limited

Bid Details of Suich Industries Limited IPO as on
04 Jun 2019 | 05:00:00 PM

Category No.of shares offered No. of shares bid
1,953,600 2,569,600
1,953,600 2,865,600
208,000 208,000
4,115,200 5,643,200
QIBs No
QIBs+HNIs Subscription 1.32X
Retail Subscription 1.47X
Total Subscription 1.39X

Discussion on Suich Industries Limited IPO:

    I think Powerful tech was incorporating in 2015 and IPO in 2018 , not much experience of management. They are in trading of TV , monitor and power bank.
    They are not in battery, Chargers.
    This company is very small 2018 turnover is 65 crores vs Suich 200 + crore.

    PE multiple 11 at time of IPO but suich is 7.5 for 2019

    1. The sector in which the company is doing business is highly competitive. The business model is “low margin and High Volume”. So if revenue falls the profit will also go down heavily.

    2. There is no moat in the business. They are simply importing mobile phones, power banks chargers from China and Assembling them at their Uttarakhand Plant. The operations are majorly performed manually by employing employees and labors, therefore, the quality of finished products depends upon the skill of the labor.

    3. Criminal Offences against the Promoters:
    https://d2un9pqbzgw43g.cloudfront.net/main/criminal-charges.png

    4. The company is catering only to the Northern region. Their main customers are people in rural areas. So they do not have frequent demand for replacement phones as that of Metro cities where people replace mobile in 14 months on average.

    5. The company directly sell products to 20 distributors in North India. Therefore, they are highly dependent upon the distributors to sell their products efficiently.

    6. The manufacturing facility which is located at Haridwar, Uttarakhand is currently operating at around 33% of its installed capacity as the company is working in only one shift rather than 3 shifts.

    If we remember last year a company called Powerful Technologies hit the SME IPO having the same set of products.

    The Issue price was 51 and it is currently trading at 13.

    They are engaged in the business of manufacturing mobile phones, mobile batteries, mobile accessories, power banks, and TV sets.

    They import parts and equipment’s from China and subsequently are assembled together to convert them into a finished product.

    They do not manufacture the parts and equipment in-house.