Diksha Greens IPO opens next week for subscription and we have compiled a set of 25 parameters to assess the quality of the SME business. Here is a snapshot of Diksha Greens IPO Review, please scroll down for the total score.
Diksha Greens IPO Review: Business Basics
Are the company’s annual revenues more than INR50 crore?
No, Diksha Greens had revenues of INR41.8 crore in FY2018. Revenues declined from FY2015 levels of INR54.25 crore.
Are the company’s annual profits after tax in excess of INR5 crore?
No, Diksha Greens’ net earnings stood at only INR55 lakh in FY2018.
Has the company got a strong and recognizable brand?
No, the company hasn’t got a widely recognizable brand.
Is there a strong moat in place in the form of entry barriers, market reach etc?
No, Diksha Greens stands vulnerable to competition from unorganized market.
Is the company free of big client risks in terms of impact on revenues?
Yes. The company primarily undertakes trading in wooden logs and timber and production of veneer sheets and hasn’t got excessive dependency on big customers.
Do exports contribute a sizeable chunk to annual revenues, giving the company an edge over its competitors?
Is there a strong connect between the company and retail consumers?
No, the company caters to businesses and has limited retail connect.
Diksha Greens IPO Review: Management analysis
Is the company’s top management experienced enough to lead operations through difficult times?
No, the company appears to be family operated and essentially one man show i.e. Mr Rajesh Pirogiwal. One of the directors is promoter’s wife and another is a 26 year old daughter with limited operational experience.
Are the management members/promoters paying themselves fairly without jeopardizing shareholders’ interests?
NA. There is no information in the prospectus about the remuneration paid to the directors.
Do the promoters have sizeable equity left in the company after the IPO?
Yes. Diksha Greens is entirely owned by the promoters as of now and they will continue to have majority of equity stake after the IPO as well.
Is the current management trustworthy? Are there instances of putting shareholders’ interests at risk for personal gains?
Yes, the disclosures in the prospectus do not hint otherwise.
Are the litigations or criminal proceedings against the company insignificant in nature and doesn’t involve big numbers?
No, while there are no criminal cases against the company or its promoters, there are a number of cases involving tax liabilities.
Are the company management’s shares free from any pledge with banks or financial institutions?
Yes. As on the date of the prospectus, no promoter shares are pledged.
Are there external investors such as private equity or venture capital firms on board?
No, the company is essentially owned by the promoters.
Diksha Greens IPO Review: Financial performance
Have the company revenues grown at a CAGR of at least 10% in the last three years?
No. Revenues have actually declined in the last three years.
Have the company’s net profits grown at a CAGR of at least 25% in the last three years?
Has the Average Return on Equity (ROE) in the last three years been more than 15%?
No. The company’s Return On Net Worth (RONW) in the last three years has been in low single digits.
Has the company maintained positive operating cashflows in the last three years?
No, cash flow from operations was negative in two of the last three years.
Has the company witnessed a declining trend in debt/equity (D/E) in the last three years?
Are the company’s working capital requirements less than 20% of its annual sales?
No, the company required a significant working capital of INR10.85 crore in the latest year. This was 25.9% of its annual revenues.
Is the Debt/Equity ratio less than 1?
No, the company’s D/E ratio as of 31 March 2018 stood at 1.59.
Diksha Greens IPO Review: IPO objectives and valuations
Are the IPO objectives in line with the broad corporate guidelines? Debt reduction is fine, funding fancy furniture with IPO funds is not.
Yes, the funds will be primarily used towards working capital requirements.
Is the company offering some discount on Price/Earnings (P/E) ratio compared to its peers?
No, valuations are higher than its competitors in both cold storage and timber segments.
Is the company offering some discount on Price/Book Value (P/BV) ratio compared to its peers?
No, P/BV is on the higher side when compared with its competitors like Snowman Logistics, Agri-Tech India and Greenply Industries.
Are the contingent liabilities less than 10% of latest annual revenues?
Yes. Contingent liabilities are the doubtful cases which may create liabilities in future and thus, are major risk factors.
Diksha Greens IPO Review gets a score of 6/24 with a clear indication of aggressive pricing. Head to our IPO discussion page to get latest subscription details and check out this page for latest IPO grey market rates.
Disclaimer – The objective behind Diksha Greens IPO Analysis is to offer an unbiased view of the company’s operations, offer details, strengths, weaknesses, financial performance and valuation. The IPO rating framework helps investors in taking a call if Diksha Greens IPO is worth investing or not. Nevertheless, this is not an IPO recommendation to subscribe or avoid and the decision to invest should be based on individual investor’s risk profile.