Synergy Green IPO Opens Today: Should you Invest?

Synergy Green Industries Ltd. has planned to raise Rs.26.46 cr through the issue of 3588000 shares at 70.00/share. Synergy Green IPO opened on 04th September 2018.

Synergy Green Industries Limited (SGIL) is engaged in the business of foundry, that comprises of manufacturing of castings like industrial, turbine, metal, steel etc. and Windmill Parts.

Investment Rationale

• SGIL has target to be among the best companies in the world in their line of business and therefore is continuously investing in the state of art facility.
• Synergy Green is also making continuous investment in the development of new products & technologies. This is either on its own or through the collaboration with suitable technology partner. As a result, the company has become an industry leader within India in most of the products manufactured by the company. The company has also ensured acceptance of their products worldwide.
• The company has long term relationships with major customers such as like M/s Vestas, Denmark, M/s Gamesa, M/s GE Renewable and M/s Enercon Germany, M/s ZF and M/s Siemens.
• The company’s location of the current manufacturing facilities provides the company a significant competitive cost advantage related to raw material sourcing manufacturing and labour costs. Further the company is able to address the western markets efficiently through this strategic location

Purpose of the IPO

The objects of the IPO are:

1. The net Proceeds from Issue will be utilized to meet working capital requirements of the company
2. For the purchase of fixed assets like plants and machinery.
3. To achieve the benefits of listing their Equity Shares on the Stock Exchanges. The listing of Equity Shares is expected to enhance the company’s brand name and provide liquidity to the existing shareholders.
4. Offer related expenses
5. General expenses of the corporate.

Synergy Green IPO Detail

• Issue Open: September 4, 2018 – September 7, 2018
• Issue Type: Fixed Price Issue IPO
• Issue Size: 3,780,000 Equity Shares of Rs 10 aggregating up to Rs 26.46 Cr
• Issue Price: Rs 70 Per Equity Share
• Market Lot: 2000 Shares
• Minimum Order Quantity: 25000 Shares
• Listing At: BSE SME 

Valuation – Should you Invest?

For the year ended March 31, 2018, the company’s total Income and Restated Profit after Tax were Rs. 10,312.99 Lacs and Rs. 466.42 Lacs, respectively compared to the total Income and Restated Profit after Tax of Rs. 12,067.19 Lacs and Rs. 485.96 Lacs, respectively in FY 17. The company has improved their financials but has carried forward the losses in the balance sheet.

Further, the company’s peers (Kalyani Forge and Ramakrishna Forgings) are trading at lower P/Es compared to SGIL. Synergy Green IPO seems to be risky one. Only risk averse long term investors may “subscribe” for this IPO.

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