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Last Updated : Oct 28, 2015 12:37 PM IST | Source:

Subscribe to S H Kelkar IPO: Ajcon Global

Ajcon Global has come out with its report on S H Kelkar and Company IPO. The research firm has recommended to "SUBSCRIBE" the issue, in its research report dated October 27, 2015.

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S H Kelkar and Company IPO review by Ajcon Global

SH Kelkar & Company is the largest domestic producer of fragrance, with 20.5% market share with exports to 52 countries. This segment forms the bulk of its revenues while its other business of flavours contributes about 5% of revenues. The estimated size of the Indian fragrance industry and Indian flavour industry is Rs. 1,880 crore and Rs. 1550 crore, respectively, in CY13. The company is an emerging player in the flavour segment (2% market share in CY13) in India with exports to 15 countries.

The Company has witnessed excellent performance over the past years. SHKL reported revenue and net profit compounded annual growth of 16% and 22%, respectively over FY11-15. In FY15 though, the effects of overall slowdown was visible with topline growth slowing to just 10%. The topline as well as profits were also impacted by raw material availability and pricing issues, which led to a decline in margins. However, the Q1FY16 performance is pointing to some pick up in topline and rebound in margins. In addition, with the debt repayment from the proceeds of IPO, the company would be able to save Rs. 18 crore of interest cost immediately.

At the upper end of the price band of Rs 180, the issue is valued at a P/E of 28x on post issue FY16E EPS assuming interest cost savings which is a at a premium as compared to 20-26 times CY15 price/earnings ratio of global peers such as Givadaun, IFF and Symrise. With due consideration to factors like a) largest domestic producer of fragrance, b) market leadership position, c) significant share in domestic market, d) major beneficiary of increasing demand from FMCG companies specifically present in personal care, packaged foods & dairy products, we recommend “SUBSCRIBE ” to the issue .


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First Published on Oct 28, 2015 12:37 pm
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