Mahickra Chemicals ltd. (MCL) IPO Review, Should You Invest?

Mahickra chemicals (MCL) Ltd. has opened its initial public offerings (IPO) of 21,00,000 equity shares  on 16^th of April, 2018 with price band Rs.24- Rs. 25. Mahickra chemicals IPO will be listed at NSE under SME emerge platform.

Mahickra Chemicals Business Profile

Mahickra chemicals ltd. (MCL) is a Gujarat based company established in year 1994. The company is engaged in business of manufacturing and trading of reactive dyes. Its manufacturing business started in year 1998, while the trading business started since 1994.

Mahickra chemicals specialize in black reactive dyes. It manufactures 40 different types of reactive dyes. Textiles and garment manufacturers are main clients of the company. It also offers specialty performance to the printing and Textiles dyeing industry. Its production capacity is approx. 900 tons per annum.

Purpose of Mahickra chemicals IPO

The proceed from the IPO will be used for

• To fund working capital requirements of the company-Rs. 4.86 Cr.
• For general corporate expenses- Rs. 0.39 Cr.

Key dates of MCL IPO

• Issue closing date: 18^th April, 2018
• Face value: Rs. 10
• Minimum lot: 6000
• Issue constitutes: 29.02%
• Finalization of basis of allotment: On or before 23^rd April 2018
• Initiation of refunds: On or before 24^th April 2018
• Credit of equity shares: On or before 25^th April 2018
• Listing date: On or before 26^{th April} 2018

Valuation Parameter

On financial front, from FY 2014 to FY 2017, we can see revenue/net profit for FY 2014 is Rs. 43.56 cr. / Rs. 0.17 cr. FY 2015 is Rs 42.75 cr. / Rs. 0.09 cr. for FY 2016 Rs. 34.79 cr. / Rs. 0.15 cr., for FY 2017Rs. 42.26 cr. / Rs. 0.35 cr. and for 1HY 2018 Rs. 0.36 cr. / Rs.40.90 cr.

MCL has posted average EPS of Rs. 0.73 for last three fiscals. If we annualize its latest earnings and attribute it to fully diluted equity post issue, then asking P/E is around 37 plus, while industry P/E is average of 27.

If we compare its listed peers P/E, then we can see Aksharchem is trading around P/E of 14, Kiri Ind. around 12 and Meghmani Orga around 31.

Should you invest in Mahickra chemicals IPO?

In the recent IPOs, total profit of Hindustan aeronautics ltd. was (7.62%) above its issue price. Hindcon chemicals ltd. total profit above issue price was 0.18%.

Expected listing gain of MCL IPO is around 5-10%. Also, sudden jump in Net profit of the company in FY 2017 is raising concern. So, in my opinion you can invest in this IPO for a short term/listing gain. Check the subscription status of the IPO