Brigade Hotels, Shanti Gold , Shree Ref & July 5th week IPOs : Apply/Avoid? Primary Market Chatter

0:00 Hey everyone, welcome to Primary Market Chatter brought to you by Sunday Investing. This is our July 5th week IPOS episode and we have a house full after a long long time where all of us are here. Yes, I'm still trying to figure out how to add but he'll also be joining. So Tan is here. Yes, she is here. Rohit is here and then we also have Sachin here who has recently joined us and is a terrifi terrific speaker and reviewer of company. So very happy to have a full house after a long time because we understand we had a few conflicting priorities. So it's good to see join but as we grow uh and scale up the idea would be to try and make it a platform where it is enlisted. So we'll continue to revolve amongst ourselves the issues

0:47 join join but majorly the idea would be to try and continue to uh review IPOs unbiased from our uh understanding without the GMP. That is what our thought process and we'll kind of continue on that trend. With that let me just get started and uh set up uh what we are planning to do today. Uh July 5th week is a very very interesting week. Uh because we have some 16 IPOs and I don't think I have ever seen so many IPOs in one week. Uh like S mainboard IPO and no SM IPO which are coming this week. So it's a we are in for a buffet. We need to be very careful in terms because I'm sure everyone has limited liquidity, right? So we need to see which one to apply to, how to kind of uh rotate the money, which IPOs to apply

1:34 to, and how to kind of rotate it back into another IPOs. We'll see how as in when we kind of review those IPOs. But the idea would be just say I think Wednesday because again it's just so many IPOs that we might skip a few this week. We'll review all main boards for sure and SMMES also we'll majorly try and review at least the ones which are big or have some kind of interest from public but let us know which allmemes would you want us to review nextd

2:20 is there lotus is there Then Adita Info, CP plus is there, Lakshmi is there and then there's one more which I'm uh kind of forgetting but yeah there are seven uh main seven main boards out of which five we have to do in the second part which is I think M and engineering somemes comparatively but if you think that there are interesting thememes in part two which we are not covering today we are trying to cover almost allmemes in today itself so but let us know uh setting up what we'll do is much companies. We'll talk about two main boards uh which is your uh brigade hotels which is closing tomorrow and then shanti gold which is closing day aftermmes very interestingmemes in the first batch

3:06 we'll talk about salor repriations patel gam which is all closing uh on Tuesday day after and then repono which will close uh on Wednesday and in fact we'll probably start with rapono then we'll see we'll kind of keep the order slightly flexible But yeah, we'll kind of uh review all the IPOs in one go. Just a couple of housekeeping announcements. I understand it's getting late. But uh one more thing if you uh haven't heard us before, just want to make sure that I highlighted that we are not SB registered. Anything we say are not is not a qualified opinion. Just four friends chat. Five friends now chatting. Uh so think of it this way. Do not consider our opinion as qualified. Definitely due diligence and basis

3:51 decision anything that you that you do consult either your financial advisor or you read more and only use this as a guidance or even don't use it as a guidance whatever uh basically what I want to say is that do your due diligence well second thing if you haven't joined our YouTube channel spaces record go ahead and join them uh there is more to come on YouTube channel we are still in the works I read one comment on what more can come on it so we'll We are still working on a YouTube product. We'll see how it evolves. Give us a month's time give or take. But yeah, we'll come more on that. With that, let me just quickly get started. What we'll do is we'll kind of start with Rapono Limited. Setting up the company incorporated in 2017. The company is a warehousing and logistics company specializing in storage solutions for

4:37 oil and petrochemical sectors. It offers a comprehensive range of services including warehousing, secondary transportation and logistics support catering to industries such as petrochemicals, oil and gas, lube oil and specialty chemicals ages at a very high level. Although understand compared to this but at least the segment at a very high level it seems like the same in terms of the IPO it's a 27 cr IPO IPO all of which is a fresh issue market cap 99 so they're diluting a minimum 26.5%. uh financials 25.5 top and 5.15 it's coming at like 19 to 20p which at least for a plain vanilla logistics is

5:23 too high we'll try and understand logistics because of which the pad seems high wealthmind networks I haven't seen any of their IP IPOs till date but but yeah with that maybe I'll hand it over to you Sachin to talk about Rapono Limited. >> Uh am I audible? >> Yes. >> Yep. Okay. So, uh Repono Limited is established in February 2017 is a specialized provider of solids warehousing and liquid terminal solutions for oil and petrochemical sector. Uh Mr. Diendu and Mr. Sankalpa are at the heart of the business. Each bring over 25 years of experience having held key positions in uh companies like Reliance, OMGC, Indian Oil, Naira etc.

6:11 Uh Repo delivers cost competitive highquality consultancy engineering and value added services. Uh and clients include IOCL, HPCL, MRPL, Deepak Phenolics etc. uh their asset light warehouse strategy helps invest in leased warehouses and they generally take contracts only when clients upfront ensure that 70 to 80% of the volume would be fulfilled which helps in minimizing the vacancy risk. Occasionally they also provide non-core transport services for over dimensional cargo upon customer requests request. Among the sides they operate some projects include like for crude oil terminals it's oil India sasam facility for petrol and diesel it's MRPL's Mangalore terminal for lube oil they are handling IOCL's Chennai facility which

6:58 is the largest in Asia uh they do complete handling storage receipt collection blending packaging and dispatch of the materials at these sites uh they also uh handle chemical tanks for deep phenolics for hazards chemicals like phenol acetone, benzene, propane etc. Uh further they are diversified into carbon black and melamine also for clients like HPCL metal and epsilon carbon. Currently their strategy is asset light. So they operate in leased warehouses in Mundra and Bundi 2 lakh square ft. Uh they further plan to raise it to 20 lakh square ft in high consumption areas uh Ahmedabad uh Kpur, Gorgo etc. some exclusive tie-ups they have for with Schmidt from Germany which is the

7:44 largest bulk polymer handling company. Uh they collaborate with Schmidt for warehouse design and engineering. They also have tie-ups with Aventus which is a leader in polymer packaging. Uh uh and it helps in form fill seal packaging lines. Uh, Repono holds exclusive rights to sell and maintain their equipment in India and these are generally 3 to four year uh, partnerships and they are generally extended as and when needed. They normally handle five to around 5 million tons of volumes in both solids and liquids. Uh, they also have a warehouse management system which uh, helps in streamlining hefty documentation needed at the customs and compliance ports. So and their emphasis on single point responsibility which

8:29 actually means that until the whole of operations manpower and equipment are not part of the contract. So generally Rapono avoids such contracts. Now uh a pertinent question is why these refineries and PSUs would outsource these works to repon. So uh they said that uh this outsourcing work is not the core for these refineries and it also helps save cost for them around 20 to 25%. Plus government has also mandated uh to outsource such work. Uh so that is why repono is preferred. Now the general notion that since uh clients are PSUs the payments would be delayed but actually the case is not that uh private payments are delayed. uh PSUs are still generally in line though initial project can get delayed and start up to 90 days while payments may arrive in 60 days

9:16 only and receivables are not an issue with 90% receivables within the 6 months period. Uh coming to the revenues uh 93% revenues come from operations and maintenance contracts 5% from consultancy uh warehouse rental is at 3% currently uh 90% are on-site operations and 10% and offsite. So in offsite they go for lease warehouses which gives them higher margins and better control for the projects. Uh their goal is to go for a 50/50 on-site offsite revenue mix in upcoming years. They are also diversifying further into specialty chemicals and green hydrogen ammonia as and when the facilities come live. Uh they are also targeting overseas for Saudi Arabia, UAE, Oman etc. And they

10:02 said that uh project is expected in the current year if the talks get finalized. uh they achieved a significant milestone in regards to safety uh by achieving zero lost time injuries in almost 7 million man hours conducted. So that is one thing to note. Coming to the financials uh 13 CR revenues with 8% PAT in FI23 CR revenues with almost 18% AIDA and 12% PAT in FI24. uh and then it jumped to around 51.5 CR revenues and 5.1 CR pat in FI25 slightly reduced than FI24 but uh not majorly uh current year they are projecting around 70 to 74 CR in revenues uh yes

10:48 for FI26 with similar margins uh they have a order book of around 160 CR which is executable over 2.5 to 3 years this 2.5 to 3 years uh they are also in discussions with uh two major Indian companies for build on uh operate projects which is B projects uh around 400 to 500 CR but uh will be that will be announced when the those are finalized. Uh only 10 CR in major debt and bank guarantee. So nothing on that front. IPO proceeds are for purchasing forklifts as material handling equipment to uh reduce the dependency on third party uh and boosting the margins. They are also upgrading their warehouse management system for real realtime tracking. Uh

11:34 around 9 CR is for working capital and around 2CR is for warehouse racking system which will also enhance storage efficiency. Coming to the risk uh the hazardous materials that they handle is a risk uh at times the labor is also a risk though they have around 500 employees on payroll and equally on contractual basis as well. They generally bid in tenders with large players. So they can be out uh uh done on that front as well at times. Uh potential foreign entrance may pose some threats but nothing immediate as the setup cost will be uh large and high. Nothing immediate for a corner at this moment. Finally on the pricing it's at 19 times FI25 and near 14 times FI26 as what the grow project uh in Pers is at

12:21 around 39 to 40 times but is largely into gas and petroleum products. uh TVs logistics is uh profitable at standard standalone level and is at around 80p but due to consolidation and not so good uh UK entity business it is showing negative pat so uh it's uh uh that way and uh another small player is RV which is around 15p but it operates at 3 to 4% a bit there is also a listed player IMC limited which uh is primarily into liquids but at much larger scale and operates at 35% AIDA but this it's unlisted for now. So these players generally bid in tenders along with Raponu but they are more asset heavy and Raponu is currently asset light. Uh lead

13:08 manager is wealth mine which is based out of Mumbai so probably their first mandate. Uh anchor list was decent had the name of Mr. Amit Kumar from MSMEX Grois fund and smart horizon as well. So in the end it's uh the board is very professional and the management is as well. uh I didn't find any uh IPO year dressing in financial as well and this is not typical logistics so it definitely involves technical expertise not someone something that everyone can do as experience and uh is also needed and they have dual expertise in handling solids and liquids both so no players like this in uh at least in theme no players uh no player like this is available that's all >> got it u very high

13:54 order book and like how competitive is the industry I'm assuming there will be a lot of these small players right because these are these do not they do not have any asset there right it's just they tend to do the logistics at the ports right so it's a very competitive industry from my understanding so revenue is that correct >> uh for now yes because they bid in tenders so as in when they win more tenders more revenue uh more orders so more revenue you will flow in. Currently order book is around 160 CR for 2.5 to 3 years. Uh other players that are available was these are fragmented players. So some would do only liquid, some would do only solids but repono does both. So that is an advantage. >> Got it. And 160 CR order book. So there

14:40 is visibility in terms of business being there. Right. So like because I was seeing revenue is 51 >> and market increase in IP but I'm assuming it's not too much right like patita margin went from 6% to 8% which specific reasoning >> no FI25 it's reduced uh pat and a bit slightly no specific reason uh just due to some material and uh employee expenses that's all >> got it yep yep I I I read it wrong my bad uh yeah but do you think like uh at a very high level and again in the interest of time at 19p do you think enough value uh left on the table because not plain vanilla logistics I understand but how do you see it against

15:26 let's say like do you compare it to a ais which is a much bigger pier not the but the traditional aegis logistics is in similar business so how do you look at in terms of pier and where do you see is there enough value >> uh I think some value is there but it's up to the investors who see it as not general logistics Uh but pricing is decent uh not very uh low but not too high as well. >> Some gap is left too. >> Got it. >> Because what I'm seeing is IPO 30 CR IPO. So if there is 26 CR IPO in fact so if there's enough like interest then it can do well simply because of the small size. A core question before we move forward I'm reading at a high level that there's a lot of bonus issue uh done in the share and then this is maybe generally to everyone. How does bonus

16:11 impact bonus? Like they issued 49 to one and then four is to one. So they've issued like 200 shares uh for every one share. That's a negative. But how does that impact right end of the day? It's like uh like how does that impact your holding? >> No, no impact because before IPO both these Mr. Diendu and Sankulp only had the whole holding and no prior dilution. So I don't see any impact. >> Exactly right. It's just that they've brought the share price to a lower number that is why they have done bonus right it shouldn't impact anything right >> yes >> got it got it yeah uh that was with respect to repono it's on 30th unfortunately it's a good company I will be avoiding because I have so many companies to apply on 29th that I don't

16:58 think I'll have money on uh 30th and we'll talk about brigade uh but I don't think brigade money I will put a lot in brigade so it won't be a like I won't be able to use uh that as well but Yeah, we'll talk about it. We'll see. Uh with that, let me just move forward to the second company. We'll do it short as well. Uh Salorap industries incorporated in 1983. The company engaged in the manufacturing of components for automotive and white good sectors. It has four manufacturing units in Gura, Ranipit, Kipuram and Pune and offers products like plastic injection molding parts, PUM molding parts etc. So automo components manufacturer at a very high level plastic molding company maybe but we'll see in terms of the IPO size it's a 30 cr IPO all of which is a fresh

17:44 issue market cap 114 crores so they're diluting like 26%. FY2 financials 163 decently valued okay valued company they have left something on the table at a high level they're coming at like 11.4p 4p something like that 11.5p LM is greatex which is a decent LM not great not bad uh but yeah with that over to you guys to talk about cellor yes cool soap industries is a manufacturing company they're mainly specializing in the production of customized components for the automative and non-automative industry the company

18:30 operates in the B2B sectors offering both adive and non-adive process components. They were originally formed as a proprietorship but then converted into the private limited company. Uh majority of their projects uh products are uh screen sealing pass parts uh plastic injection molding. Then there is films uh which is PU molding, EP molding, labels and stickers and uh foam products. Uh they supply to OEMs, tier 1 and tier 2 customers as well. OEM customers in R2 Suzuki, Tata Motors, Kia Motors, Hyundai, Mahindra Electric and Foxy. Uh majority of the raw material is uh sourced from India. 4% is the chunk

19:17 which they import from China. Uh the company also exports to Brazil, China, uh Germany, Poland, UK and UA. Majority of contributors of the turnovers the company's turnovers in India are Maharashtra and Tamil Nadu coffee concentrated sales in 99% 98% 96% uh uh sales top five customers top 10 customers uh company overall this is not a very good business but a decent business company has been uh generating consistent uh positive cash flows from last 3 years FYI 23 May 2 cash flow uh 24 May 10 crores 25 May 21 crores to decent cash flow generate

20:04 return ratios are also expanding over the past 3 years 9% 17% now 22%. Uh valuations to post issue 11.44 44 uh times FI25 RA which is uh very good valuations given the sector trades at 2025 uh machin plastics company which is trading at 17 times right now. uh which is much more comparable to the company. Uh the other company which is into toy manufacturing vaggera that is also anme it's it's also trading uh in the same range. Uh then there is which is I think

20:52 is in a higher range because of the higher growth. uh given this company has been growing very uh slowly FY 24 almost 5% growth FY 27 25 16 17% growth although their IDA and PAT margins have improved significantly 13% PAT mar IIDA margin from 6.67% 67 percentage FI20 comparing FI23 to FI25 PAT margins 2% say 6% uh inventory days has is obviously going up data days is uh stable to 60 65 days their credited days is going down uh 62 say 52 range almost one good thing is

21:37 their asset turnover is very good last years almost one FI 23 1.42 24 1.38 and FI25 1.14 their capacity uh the only issue is the capacity for the products which is the film VA part is going down uh should not be an issue until uh they're matching the same figures by increasing the plastic injection molding part to FI 25 main injection moldings 54 sale PU moldings 5 crores. Form label and sticker products say 45 crores. Skin sealing parts say 33 crores to and brought out parts say 21 crores. So mostly plastic injection

22:24 molding is the major chunk. Form label and sticker products is another major chunk which is 45 crores. Then the third third part is the brought out parts which is 21 crores. customers uh segregation but if I talk about the 10 top 10 customers they contribute 75% of the uh turnover may the first customer which is the highest c uh highest in terms of the uh turnover contributor contributes 20% customer two contributes 12% and customer three contributes 7%. And if I talk about the relationship with these customers uh so customer one they have a relationship period of 32 years customer 23 years customer 3 10

23:10 years which is very very good thing and these are uh they have also not mentioned specifically which OEMs and tier 1 suppliers are these who are mad revenue byation. So this is the issue is looking uh decently good to me. The only issue is key how market will uh value this injection molding or a business. Uh their factory I also saw uh the images of their factory in their RSP. It it looks good to me at least. Uh so should be should be fine. There are not many uh global headwinds as well for this company because majority of the uh OEM customers they have is uh Marauti,

23:56 Suzuki, Tata Motors, Kia, Hyundai, Mahindra Electric which which are the which are the growing uh you know the growing companies in India which is giving highest number of units month by month. So the issue is uh priced at 11.5 * FY25. So I I believe there is still much left on the table for us. So should be an apply. >> Got it. Yeah. I also had a very similar read at least at a high level the company look pretty cheap. Uh my only issue was with respect to uh just the LM. I have seen these issues where

24:43 greatex is a good LM but issues now for some reason whatever is cheap tends to get cheaper at like in some of the cases like I remember paramount diet I was very positive on it wasn't a pure play vanilla textile company right but it was cheap according to my understanding then the market kind of crashed it right so that's my one worry especially considering so many IPOs together I'm not sure but again at IPO price I don't think there's a lot to lose especially in the current market. So I would be applying just for IPO. I would probably not chase that listing but market is higher. So I don't see how there is anything to lose at least at IPO price. So I would be applying for this issue assuming I have money left is

25:30 how I I'll kind of put it. Uh >> also Manish I I I forgot few points 12.4 4 to capital expenditure to uh to establish plant and machinery infrastructure development and other auxiliary equipments to majorly they're trying to go into higher value products as well. Few negative points which I which I figured is 5% growth in FI24 17% growth in FI25 uh revenue growth pat IIA margins and PAT margins has also improved but the majority of growth is leaded by improved uh material for them. So the COGS is going down that that is where the growth is coming from coming from. uh company has also faced uh few contingent liabilities 56 56 57 lakhs uh

26:15 contingent liability and 13 tax proceedings as well or issue which was the uh KMP's withdrawals very high amount of salaries almost 5 salary withdraw every year also job in books plant and machinery their guest house and all is uh is owned the rest office it it is least. So these are these are the few points to keep in mind while applying as well. >> Got it. But yeah, again I would be applying to this issue assuming definitely consider applying to this issue. With that we have kind of covered the second company which is Salor. Now we'll move forward and talk about the third company. The third company

27:00 which I want to talk about is uh SH refrigeration. So let me just set up SH refrigeration. told us English because Rohit will be covering it but then we'll try and move to Hindi after this issue. We'll at least like try and do more of Hindi. Um so setting up the company incorporated in 2006 companies engaged in manufacturing of HVAC systems including air and water cooled condensing units, chillers and spray dampenering systems. It serves various sectors such as automotive, marine, print, media, chemicals, pharmaceuticals and general engineering. The hot IPO and there's just so much demand for ref and it's a big size IPO. Uh so let me just set up the IPO IP 117 croresm IP which is definitely big 94 crores fresh

27:46 23 crores company 117 crute 445 market financials revenue 99 crores or 13.5 crores so company is coming at 33p which is just insane when you think about theme raising money at 33 I think I have seen very fewmemes come at this valuation I can't think of any for that matter if any of you can remember do post in comments which uh any company which has came in at such valuations at least on uh IPO price in terms of the LM the LM is nanolia financial uh source let's just try and understand series refrigerations although I understand

28:32 it's a moed business at a high So maybe it deserves the PE but when you look at it from a high level all I'm saying is that not a lot of raises I have seen uh at this PE. So with that over to you Rohit to talk about Shir refrigeration. >> Thanks Manish. Uh there have definitely been raises at higher prices once you remove exceptional income or other funky kinds of other income. I've seen plenty of copies that come at 4050p uh but it's all hidden. Uh anyway let let me cover. So this is a company that sits in this perfect intersection of two of the hottest segments. One is defense and one is HWAC which is this uh air conditioning heating ventilation air conditioning industry which both of

29:18 which get obscene multiples. So I don't know if this will get a sum of the two multiplier of the two or what but uh we'll find out I guess when it lists. So what these guys do is they manufacture chillers, refrigeration and air conditioning appliances and many parts of this HVAC uh value chain. Uh now the interesting thing is they mainly focus on marine chillers. These are chillers that would go on ships including navy ships uh warships, submarines and so on. and they have a lot of those approvals and uh certificates certifications that are needed to deliver to the Indian Navy which is obviously the thing that makes this company uh special and and provides that mode. Uh so what are these? So the

30:03 simplest way to think about it is a the kind of air conditioning that would uh be used inside a ship or a submarine. You can imagine that the AC that you have at home is not the same as the AC that would be in a submarine operating you know whatever thousands of feet uh under the ocean. Uh so apart from that though these uh air conditioning systems obviously have to cool the equipment the warfare systems all of those things need to be operating at some specific temperature. So this the the purpose of the cooling system is quite complex when you come into the specific applications of a marine or either a ship or a submarine and that is what is the IP of this business in in terms of how how they design how they manufacture and so on. Uh so they have so I I'll try to

30:52 explain what is special at least from how I understand it. Uh so there are two things I think I mentioned the certifications they have some three or four different certifications uh some uh what is the first one it is the registration by the direate of quality assurance the warship project from the ministry of defense which is I think valid till February 2028 and then they have one more which is from the diretory of electrical engineering also ministry of defense to supply very specific products again for naval uh ship building and there's a third one from the integrated head headquarters for ministry of defense again to manufacture hback systems for defense. So they have three specific uh registrations and approvals which is obviously not easy to get. It takes a lot of time and it's one of the reasons

31:37 why defense companies are valued the way they are. The second thing that is special about a HVAC system is that the way the the the cooling system is designed. Uh you need to be able to do that not just with air which is how most of our ACs work which is air cooled but you need to do a lot of seawater cooled uh systems as well and they operate obviously very differently. They need to be able to take se you know water from the ocean and use that in the system. uh the ships and the submarines might operate at different angles, different tilts. Obviously, if you're in a building, the building is in one is in one one orientation, right? It's always standing. Uh whereas the ship is constantly moving. So, there is there are very different plus of course it has to be water resistant at the end of the

32:23 day. uh so there are things in the product itself that make it different from a traditional HVAC system and not any HVAC player also can start doing this and this has been a focus for this company for the last I'd say 15 odd years they started I think by going more in the printing and the dairy industry but at some point the promoter decided that he was looking for a break into a slightly larger industry and then I think through a lot of effort they figured something out uh you know for the Navy and that I think about 10 years ago and that was the thing that triggered this business and sort of brought them to where they are. Uh so if you look at their clients they've not specified it but it is very clear that Masond do is their largest client. I believe about 40 55% of their revenue last year 40% of revenue in FI25 55 in

33:10 the year before that. Uh they also work with GRSC and I think these two together will make up 60 70% of their their revenue. uh they did almost 100 cr last year with about 13% PAT not great growth year but they have a very good order book of almost 160 cr uh no sorry 230 cr of which 160 cr has to be delivered in this year itself uh in the I think 150 crores to be delivered in FI26 uh if you look at their balance sheet you will find it very very it would look very concerning from you know just from 30,000 ft but it looks like it is just the norm with this industry. Every defense company has a very similar balance sheet. You'll see the receivables for this company is equal to its revenue. C2C had come some time back. I mean I don't want to go too much

33:57 into it but it came with everyone questioning uh why their revenue equals their receivables. Uh but that's exactly the case for this business also and it was justified by the promoter that this is how the cycles work in this uh in this industry. It takes a lot of time to deliver, install, test, uh commission the product and then there is of course a payment cycle which happens even even even later and as you can expect there are horrible cash flows. It's some 30 40 cr negative cash flow for this last year. Uh and that is the reason for the fund raise. So they've raised they're raising about 115 cr almost all of it. Uh so there's a small uh worth component. I'll just come to that. But all the fresh raise I think 70 75 crore of that raise is just going to fund their working capital which is essential

34:44 for them to grow at least for another 1 and a half to two years. So if you assume that they will do around 160 cr for this year can say that they should around 2022 cr pat uh which is pretty healthy and it will show the growth that is needed. Of course this is a business where you have to continuously keep winning orders. So one of the concerns for me in this segment is that I feel that the market size of what they're doing right now is somewhat capped. uh I think the promoter which I tried to justify by saying there's some again I don't remember the exact number now but I think he said six lakh cr worth of orders over the next several years for the navy of which 1% would be the hback system which about 6,000 cr over several years which is maybe 1,000 cr 1,00,500,

35:31 200 cr per year let's say if it's over 5 years so for this company which is say 100 cr revenue business for them to become a 500 cr 600 cr business per here they will have to you know capture 50% of the market. So this is not a very large market if you just take the navy business and so I I I would like to see them get into even if you look at the army as a whole if you look at the air force if you look at the the broader army I think if they can start doing some projects they use this to deliver products for them that would give a lot of comfort on the size of the market uh otherwise somewhere I feel their growth will be cap because today 85% of their business is just the navy marine uh marine marine business so the of course if they can go beyond the navy and go

36:17 into just broader ships and stuff. Let's we'll have to see some of that delivery. Uh overall I I I was very impressed by the promoter and the founder coming from very small town called Karad in Maharashtra which is where the factory also is located. You can see his passion across his interviews. He wants to bring you know make manufacturing in India reliable comparable with the global peers and that's what they're proving by you know uh uh winning orders against them at at a far lower cost and there's a very nice interview from 3 years ago on how they designed the first system. So I think it it it'll be a good listen for you guys also if you guys are interested in this company also very very strong board full of people from the ex army I think the LNT head of defense also is on their board so very

37:04 very wellbuilt company so far uh on the peers now at least how to value this company uh there are obviously no direct peers but I've just tried to look at three four other companies that or three other segments where we can find some peers so one is there's this listed company called Kirloskar Pneumatic which is a direct competitor but a small part of their business is this. You will see their name in some of the tenders that these guys compete these guys also bid for. Uh so one of their largest components is or businesses making compressors which is one of the components that go into the chillers that uh these guys make uh and is part of the HVAC system. Uh but they have they clearly also do the entire end to-end system which is why they're competing with uh these guys. uh kilos

37:51 trades at around 39 times or 40 times let's say u then we have all these ODMs for HVAC systems who make retail air conditioning products EPAC amber and so on they all trade at obviously 60 to 100x KRN it's a different part of the segment heat exchanger space trades at 100x with a you know huge capex story but still it trades at 100 times and then on the navy focus side you have some anme CFF which had come with an FP PO recently. Uh so slightly different segment but they trade at 60x and they are also a designer manufacturer integrator of a different component of this you know which is fluid control and mechanical systems again for these kind of for the same end use which is of for a submarine or a warship. Uh so everyone

38:38 in the space except for Kiloskar which obviously does a lot of other things they do a lot of oil oil and gas segment and all everyone trades in this anywhere from 60 to 100x. uh this company is coming at 33 times which for anme is expensive but for the segment to me looks very cheap defense to obviously almost everyone trades at at least 50 times if not more uh very very strong anchors very strong preo we had ashish katlia with Bengal finance we had shi fund which is mukulagarval's fund uh to me this looks like a blind apply 33x it's that perfect intersection of two very hot teams It's very likely that this will also open at 90%. Question is whether to buy at 60 times whether this will there's

39:24 every chance I feel in fact had to guess I would say it would actually go up from there also for some time but I think it will then come back to probably trade in this 50 to 60 range. uh as you get closer to exit to the sort of the end of the year or maybe H1 numbers if they are strong uh you might again see a bit of a runup but I feel that 60x or so is 60 to 70x is a good range uh so I'm not sure whether it is worth chasing a little bit you have to see the screen and stuff but yeah I I I'm you know intuitively when you see the business see what they do see their capabilities see the promoter see the investors uh gives a lot of comfort that this is the kind of business that will get cornered and will do very very well. Uh initially there

40:09 will be a lot of hype and I would say deserved also because of what they have built it and what they have done. Uh and they've really really brought stuff that we used to import uh till maybe 10 years ago they have brought that in-house made it indigenous. So kudos to them also. Uh so if you can ignore the balance sheet which is always going to be a problem rest of the business is top class. But then cash flows are important, right? And like like there needs to be some kind of sanity on cash flows or like how does that change over time, right? Like and maybe this is a broader question. This is not really a shri question. This is more of a the complete segment question. So maybe I'm just going towards the like I'm changing the wrong uh thread.

40:55 >> Yeah, we can't we can't fight the market. Yeah. beyond the point if if if this company gets derated because of its cash flow suddenly the entire defense market cap will fall by half. So which is not going to happen not overnight at least. So the market is giving what it is for for this segment because of obviously all the global conflicts there are that there are for the difficulty with working with the government with getting the right approvals the years and years it takes to keep leroing to get your you know to get your break and to make it big. uh it it takes a lot of work and that is what the market values now 60x 90x they're all equally obscene numbers so you just go with the flow when it gets derated this will get

41:41 derated with it try and identify and get out if it never gets derated could get rerated further who knows so >> so here's the thing right if something is at 80 then my bet is on it getting derated rather than it getting rerated right But yeah. >> Yeah. If this is coming at 33 times, so you're safe. Like if you get it in IPO, you're safe. >> If you get it at 90 on listing, I'm fairly sure it will go up. I I don't know. But my gut is it'll go up before it comes down. But I still think it'll probably trade like a CFS, which is 55 60 times is where at least initially it'll come and stabilize there before it starts moving as it reacts to. So like for example, there was a tender which they had bid on which was opened 2 days ago. Let's say they win that tender and

42:27 the order win comes a week or two from now. That's another you know trigger which will again push the stock up. So it's very hard to tell for sure but I think there is enough hype here that this will do well. And sorry one more thing that I wanted to mention was there is an OFS component here but the OFS is from one of the original investors this IDBI which is the Maharashtra defense and something aerospace something fund uh which is a VC fund that invests in these kind of companies. We've seen them in Techa also and a few other companies. They are selling us part of their stake. So this is not the promoters taking any exit. >> Got it. Understood. Uh helpful. I kind of still think that this is one of those types very similar to let's say Monach

43:13 which you just need to apply and hope and just hope you get something. Although it would be difficult considering the current uh rules but it's a decent size IPO right 117 crores. So I'll definitely be applying to this one. Rest all I'll work around and I know it will be very difficult to get subscription but then it's just worth it considering all the hype and deservedly uh so right because the company is trying to build indigenous things which we earlier used to import. So I like the story I'll be applying. Honestly I haven't seen anything about and the company I read brigade. So with that maybe let's just let me just go forward and uh move to brigades hotels. And this is a company which I know a lot of people wanted to know. So if you are here for brigade starts now

43:59 uh setting up the company uh it's a owner and developer of hotels and key cities in India primarily across south uh India and is a wholly owned subsidy of brigade enterprises. Brigade enterprises key subsidy and hotel uh chains key owner. Uh the company has a portfolio of nine operating hotels across Bangalore, Chennai, Kochi, Msur and Gip City with 164 keys is a company. So those are the names under which the brands operate but the property belongs to these people. Setting up the IPO, it's a 760 cr IPO. All of which is a fresh issue. IPO market cap is close to 3,400 crores

44:46 3,400 crores for 760 cr just 10% retail. So essentially just 200 CR is available for HNI plus retail rest is QI plus which is like 75%. financials 24 is rather low but repay so maybe that will help with respect to just uh paying off the uh depth uh component I'm just rechecking just to make sure that I have the numbers uh right which I have kind of noted down uh yes it is and in terms of The LM the

45:33 LM is uh LM is JM Financial. So with that maybe I will hand it over to Tanbe to talk about Brigade Enterprises. Over to Tan by to talk about Brigade. >> Is my voice audible? >> Yes sir. >> So Brigade Hotel Ventures Limited. So in short form I'll tell BHVL. Okay. So Barney Bulbanga. So, BH Well is a uh subsidiary of the listed brigade enterprises limited which is a $3 billion MCAP company. Uh it's a real estate giant which is majorly in the cities of mostly in Bangalore and in uh the cities like Hyderabad or some in

46:19 South India. So, BHwell is South India's second largest owner of chain affiliated hotels. It has a portfolio of nine hotels with 1604 keys. So what I mean affiliated is they have tie-ups with Marriott, AOR and Intercontinental. Uh so these three are the one of the world's finest global hotel management companies. Uh so how these tie-ups work is let's say uh brigade is making 100 rupees around 4 and a half rupees will be paid to this hotel operators as the fee to just manage and run the operations of the hotels and rest 95.5 95 96 rupees revenue will be kept by the BHL. Okay. So Brigade Hotels operates in upscale

47:07 upper upscale midscale and upper midscale uh segment. Uh so what does this mean key? Yeah. Uh there are you know multiple segments in the hotel. So these guys are below luxury but above the moderate range which is your 5,000 rupees 6,000 rupees 4500 6500 7,000 per night. So this company is in that segment. So I'll just read out the it port nine hotels portfolio. So they have three grand mercures uh one in Bangalore, one in Mysur and one is in Ahmedabad gift city. They have two Holiday Express, one in Chennai, one in Bangalore. They have one uh two Sheratans, one in Bangalore, one in Kochi, one is an Ibis styles in Mysuru and Holiday Express suits in Bangalore.

47:55 So this company currently operates at an AR which is average uh room revenue is of 6,700 rupees and with an occupancy of roughly 677%age and the rev par comes at like 5138 rupees around 5100 rupees. So the company is raising 760 crores precisely 759.6 6 crores out of which they'll be repaying debt amounting to 468 crores and they'll be buying undivided share of land from the promoter Brigade Enterprises tuning to 107.5 crores and the rest 185 crores will be allocated towards unidentified uh acquisitions and organic initiatives and general corporate purposes. Mindwell they have already raised 126 crore as an preipo

48:42 placement and if you just check out the DRP the difference between DRP and RP the debt repayment earlier was 485 and now that is reduced to 468 assuming that 27 crores will be repaid from the earlier preview placement and if I just uh console the numbers to another 100 crores will get added up in the in acquisitions plus the GCP part. So if I just add it up 485 crores debt repayment 108 crores towards buying the land and rest 285 crores towards acquisitions plus GCP. Uh now coming on its pipeline uh which is which properties are expected to open in future the uh the company will be commencing two fairfield by Marriott uh one will be near the airport of

49:29 Bangalore and another will be in Hosur Bangalore. Okay. So these two properties uh they should get commenced in FI28 and FI29. The company's building one luxury hotel in Hyderabad uh whose manager will be intercontinental. The company's building one another luxury beach resort uh which which is uh no which will be managed by Hayat in Chennai and the company will be building another one luxury wellness resort which will be managed by Ritz Carlton which is in Wcom Kerala. So and all these properties are expected to commence from FY 28, 29 and 30. Okay. Now coming on his financials, FY23 the company did a revenue of 356 crores. Aida was at 114 crores and the uh the company recorded a net loss of

50:14 3.1 crores. In FI24 the company did a growth of roughly 15% the revenue scaled up to 410 crores 410. The AIDA was at 144.6 crores and the PAT was 31 crores. Okay. So in FI25 the compared revenue of 471 crores which is like 16 and a half% kind of rise a bit of 167 crores and pat of 44.5 crores. Now when you look at the P&L it looks like 25 approx but the company has you know paid a deferred tax which adjustment of 120 crores. So if you just adjust that uh the PAT adjusted PAT comes at 44.5 crores. Okay. uh now before coming to its expected FI26 estimates uh we will just talk on

51:00 the valuations and uh then I'll come on uh the 26 numbers and why uh those numbers are uh extrapolated. So the company's value coming at a mcap of valuation of 3420 crores okay which is like 25.5 times fi 25 beta and 18 * 18 18* fi 26 e beta uh now how this 18x is coming after uh doing the post moneya and then discounting the additional GCP money which will be adjusted as a liquid uh liquid asset which will get decreased from the uh overall EV. Now why uh I feel that FI26 will be muted. The reason is very clear. I'll

51:45 tell the numbers after this. So the company is not going to commence any kind of additional property in FI26 or even FI27. So whatever growth is going to come, it will be on back of two things. First uh increase in the uh uh average occupancy. Okay. Currently it is at 78% and if you if I just you know break down the numbers the company has commenced one IBIS in Mysuru in August or September of 24. So that comp that hotel or asset is running at roughly 40 30 40% utilization. If I just remove that from the portfolio the portfolio is at running at 80 to 81% utilization. So I feel this is I guess second best utilization in the industry. But there's an what we can say negative point towards

52:32 Generally it's tough for a hotel operator to run at more than 85% or even 83% because in some specific seasons the hotel run at 95% in some specific reason seasons it runs at roughly 70% 70 65% 75%. So when just console it's very tough for a hotel operator or even a hotel owner to run that hotel more than 83 84 82%. So the incremental increase in the uh occupancy is not expected to go above 83% if I remove the IBIS and if I just put in the it should not go above 80% expectation to get that utation up if it goes to 85 it's well and good maybe 27

53:20 in okay average revenue rate that industry wise increases this by roughly 8 to 10%. So it is uh for the all the companies in the industry be it in any segment. So yes for sure luxury increases at like 10 to 15% is segment of hotels increase by roughly 5 to 8% approx. Um it's tough to go above 8% until unless you want to change the whole AR or the product mix. So if I just extrapolate all these numbers it is very clear that company cannot grow above 14 or 15 or max 16% which is the optimistic level. So 14 15% grow if I just put in that in the numbers revenue

54:06 if I just put it like similar margins I'll tell why similar and why not higher or higher should not be more than 02 or 4% that is into the midscale segment which is the lowest in the portfolio I won't say lowest but second lowest so that percentage of aid and the increase due to the operation efficiency. So that will get knocked off or overall margin 2.3% BCPS put in that similar percentage higher than on the back of debt around 75 crores. So what I felt on overall company

54:53 it's competitor why looking at their um ARR product mix um kind of business kind of assets major peers first should be ajurindra park hotels second should be seami and third should be jiper jiper operates hayat sami has I am mostly marriets and aj has its brand but they are into similar kind of what we can say product mix they have some yes they have flares which is an FNB brand but still overall utani mixes so appj is valued currently at 16 15 16 * 25 and on forward it's like 12 13 times is at roughly 17 time 18 * 26 and jiper is at I guess 15 times so this is

55:39 coming actually at a premium if I just average so I'll not take a PJ because you know market is not very kind towards a PJ even if I do the average of Sami plus jenniper it is at roughly 17 times already 18 times per and Sami intends to grow by 20 to 25%. Jenniper intends to grow by 15 to 20%. Uh so what I felt I expect this is we are saying 15 and a half% should be on higher side 14 and 15% so I felt the valuations are pricey at par actually more than at par and the IPO

56:26 proceeds so my view on this company is very Clear you invest in this company only with a view of more than 2 years with a 15 20% keer returns then only you should apply otherwise it is an award from my end and the company is from you know brigade brigade is a very reputed developer based mostly out of Bangalore and they have you know good decent track record they have made money for the shareholders in the longer term. Uh one more very good thing regarding the company is the company has second lowest cost of borrowing of capital after

57:11 ventive hospitality 7.8 8.3. So this is second lowest. So and one more thing of the new hotels and the company has cleared we won't need any additional debt but for the next uh phase of growth or construction of the hotels they'll be needing another growth uh so another debt. So time this lower cost of borrowing should help this company to you know put in the hotels at the right place. So overall so I'll not be applying in this IPO. I I see very optimistic I'll put some shareholder because I don't see shareholder going more than three times. So

58:01 I'm not very interested in this company. Disappointed with the valuations for sure. That is the view people want to understand. But yeah, I have a couple of things to add. This is something which I read in lot of detail and this something which I wanted to run by you. It is probably one of the very few companies in hotels which is net debt free debt free company right because in hotels it would probably be a big deal right uh what I'm definitely disappointed by is just the growth% grow over the next four years which is very slow but then mainboard it tends to be okay right

58:48 because companies expect and then% [Applause] So maybe that is a good factor but what I want to understand from you second thing is just the kind of float available in the market 75% right and preipo so end of the day 74% promoter 21% institutions and 5% retail does that impact or not and like I know A lot of people are just wary of portals and for the right reasons after Leela. We were also very bullish on Leela. It didn't do well. Uh right now the shares back to where it started at least

59:34 premium pay. But how do how do you see that impacting it? Honestly, I'm slightly confused. I like the fact that it is debtree. I like the fact most end of the day. So can do well but I'm slightly confused whether to apply or not. Right now I made a mind but I think I will uh probably skip. What is your view? >> So there are three parts to this you know questions. I'll answer each one on the debt part. So even after the company will have roughly I guess 125 130 crores of a debt. So institutional bankmot promoter.

1:00:19 So institution knock from the books I guess 485 after the GC pretree after the reserves coming in from the GCP is also debt they are doing lot of expansion. So that company is supposed to and recently we have seen some institutional interest also in it. debtree

1:01:05 13 and half times with almost one and a half times bigger growth and another part is on the float majority of Indian hotel companies had 10% in their IQs because those guys have suffered losses in 22 and 23 due to 2023 even after hotels being operational So, Schllo has 10%, Ventu had 10%, Janine had 10%, Sami had 10%, Surendra had 10%. Everyone had 10% but none of them did well. I guess Vive outperformed, Si did well after one and a half years. Jenniper is still 20% below. Surendra is still 15% below. Charlotte is doing well

1:01:50 but is an opers in a different league comparison is in a very low segment and they have been growing just in like from one last six quarters I felt problem 15% even I feel personally feel 15% optimistic but hopefully they will do 15% considering the approx 6 % AR and occup but but valuations are 18 * 26 which is like much much much better company than this

1:02:38 18* 26 which is into ultra luxury so so I did not felt why this company is priced down. One more thing is 361 we have seen what they have done in northern daily. I felt market company is not at all bad. It's a very good company but not at an investor friend investor friendly valuation. So that the valuation is only you know taking me down and valuation premium let's say premium growth actually lower

1:03:24 than PS. So for that reason I am you know slightly on a negative but good bet for 3 years. Got it. And uh no, I kind of agree. Uh definitely the next phase of growth will uh at least in hotels will come from luxury and not from your uh value uh hotel chain. So luxury seems like a better segment because that is just growing a lot more faster compared to the value hotel retail things uh to like holiday all of these are uh value players right like as mentioned room rent average around 6,000 7,000 so if it is price similar to a

1:04:10 deal I would rather want to buy a deal I completely agree with you to brand premium let's say which again I kind of go back to Uh I don't know what happened with Nita but yeah I would then avoid this company. I was I wanted to apply honestly but it's just that the growth is not good enough for me and the valuations are also not uh looking great. So I will probably skip tomorrow apply everything day after and then probably also skip the 30th repo that is the plan which I'll do and then I'll see you on 31st session. So just want to highlight if you joined in between space update we'll put it on YouTube but if

1:04:56 you haven't joined our YouTube yet the link is in the pinned comments like YouTube channel subscribe with that let me just move forward and talk about the fifth company and we'll just do it slightly faster so if I can request suchin to be slightly faster on this one uh but setting up Patel cam specialties incorporated in 2008 the company's engaged in the manufacturing and export Sporting of pharmaceutical exapants and specialty chemicals. Its essential chemicals are used in pharmaceuticals, foods, cosmetics and industrial applications serving as binders, dis integrates, thicknesses, thickeners, stabilizers and jelling agents across industries. So company basically pharmaceutical micro company

1:05:41 at a high level when I look at it setting up the IPO 59 crores IPO all of which is a fresh issue uh company 209 crores market cap 60 59 crores dilution so diluting like 30%. FI2 financials company 105 revenue 10.5 cration 20p so okay valued like it it is already covering a lot in terms of the value and from what I understand we'll talk about it from suchin but next phase of growth would be slightly delayed there's a gestation period we'll figure out in terms of the LM it's it has two LMS cumulative capital like LMA or unmail

1:06:30 chemicals chemical specialty. So with that over to you Sajjin to talk about Patel chemical. >> Am I audible? >> Yep. >> All right. So the intro part is done. So I'll skip to the other parts. So uh for Patel Kim uh Mr. Besh Patil leads the uh business who he is a chemical engineer with 25 years of experience. uh they have around 136 employees they have on their payroll. Uh currently they export also export to 15 countries which is 24% of their revenues which includes Russia, USA, Japan, Middle East etc. 400 customers with almost 100% repeat orders. Uh clients include Cadilla, Dr. Ed, ITC, record banker etc. They also

1:07:15 have a USFD approval for their WPA plant uh which received slight minor observation but uh nothing too major. Uh they also have a US subsidiary uh which supports stock and cell operations and enhances Patel Gam's market penetration. So their current revenue mix is diversified into uh caroxythile cellulose 40% revenues cross carlos sodium 20% uh micro crystalline cellulose 20% revenues and others chemicals are sodium starch glycolate and other chemicals. So a common example for micro crystalline cellulose could be your daily ice creams and for caroxythile cellulose can be your eye drops dry eye eye drops that we use. uh they mentioned that pharmaceuticals uh uh uh uh are 67% of their revenues which

1:08:04 majorly dominate their revenues. Food and beverages 12% and the rest is industrial and cosmetics. Currently they operate at 100% utilization at BPA plant 3,300 metric tonal plant is at 720 metric ton which is especially for micro crystalline cellulose. They are further expanding this talot plant to almost 4,500 metric ton by January 26 which is fully internally funded. Uh if proceeds they are setting up a third facility in Masana for 6,000 metric ton which is which will focus on high margin products like cross caramel cellulose and uh sodium starch glycolate. Uh the gestation is long 50% utilization in FI27, 75% in FI28 and probably 100% in

1:08:51 FI29 and beyond. Uh not much issues on the receivables and inventory side. Uh they don't have long contracts but maintain a 60 days inventory. Coming to financials, they did 69 CR in FI23 with 8% AIDA. changed the product mix in FI24 uh which resulted in uh 15% AIDA in FI24 with 82 CR topline similar margins in FI25 with 105 CR of topline and 10% pad margins so price near 20 times both accent and sigoti trade in the same range and they are targeting almost 20 to 25% growth in fi26 for the current year so accent and both sigachi are largely dependent on micro

1:09:37 crystalline cellulose uh and because and sigachi also faced a fire accident but no major uh impact on the business yet and both accent and sigoti uh work on co-processed exients then patel gum which focuses on multiple which focuses on performance exients so co-process exants combines multiple recipients which and serve multiple functions and they reduce development time and like uh patail Both peers are now looking to enter into the high margin caroxythile cellulose and sodium starch glycod as well. So that is one thing to note. So real growth I expect uh FI27 and beyond only. Coming to risk it's high capitalization

1:10:23 capacity utilization is a risk. Uh the raw material this source is majorly domestic and dependent on minimal suppliers plus something from China as well. Though they pass on price fluctuations to buyer but uh this is one area that is hurting them. Uh similarly three states dictate 66% of the revenues. So this means that unlisted players are available to get to other areas. Uh European manufacturers might come in sometime ahead but nothing as of now. They raised around uh at 61 uh rupees per share in November 24 at 110 CR of valuations mostly HNI in that uh differential allotment and now they are coming at 209 cr. So they have shown growth in this year uh and similarly

1:11:08 growth in the next year as well. uh joint lead manager Unisone and cumulative capital unisone can be a hit and miss. So that is one thing cumulative has lesser issues but nothing major on the downside. Uh now the anchor was surprising. Uh Bengal Finance took 30% share and one venture X fund from Planifi is also there. So decent steady state operations not much IPO year addressing uh positive class cash from operations as well. So but the pricing is at par. So that is one thing there. >> Got it. Thanks. Uh M question of Sachin very specifically is there anything which is different in the business compared to let's say accent and accent will now start showing growth rightation

1:11:56 period. So if any should probably get a premium to this. Is that correct or is that wrong? So like at a high level assumption >> uh all three are now trying to enter into uh MCC, CCS and SSG which are the high margin chemicals that they operate in. Now it depends on the capacity each has and Sigachi and Accent lead in the capacity and Accent's capacity is also coming live now. So they should get better multiples. >> Got it. And this guy is trading at a lot of like at least the GMP is showing a significant jump right. So maybe at IPO price it's a decent bet and then probably look at it for short-term uh like listing gains and

1:12:41 >> yes GMP was probably after the anchor list was announced when people saw that Bengal finance took 30% share from them only the GMP has risen and stayed there only >> got it so yeah uh seems like one of those issues where you need to apply hope to get a lotment and leave while it is still in momentum. That's what I will be hoping to do. I'll be applying to pat camp. Most of my uh tricks are very simple. I'll be applying majorly for 29th val issues and then probably seeing how to repurpose that money but yeah avoiding all 28th and 20 and 30th issues. But yeah, thank you so much for covering Patel Cam. Let's just uh quickly wrap up with one last issue. The last company we want to

1:13:30 uh talk about is Shanti Gold and I know a lot of people have been waiting for it. So let me just set up Shanti Gold incorporated in 2003. Company's engaged in the business of manufacturing gold jewelry and is B2B player which manufactures high quality 22 karat CZ casting gold uh jewelry American Diamond Valley specializing in design and production of the jewelry. uh listed company at a high level from my understanding but yeah clear when he talked about it's a B2B gold jewelry player setting up the IPO it's a 360 cr IPO all of which is a fresh issue company 360 crores raised fresh at a market cap of 1435

1:14:16 markets revenue 11,000 1100 cr 56 crores so 56 crores they coming at like 28p in terms of the LM the LM is choice capital so with that over to you to talk

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