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SJS Enterprises IPO in progress: Should you subscribe to the share sale?

SJS Enterprises IPO in progress: Should you subscribe to the share sale?

The price band for the offer has been fixed at Rs 531- Rs 542 per equity share.

Allotment of shares will be done on November 10 and the firm is likely to make its market debut on November 15. Allotment of shares will be done on November 10 and the firm is likely to make its market debut on November 15.

The initial public offer (IPO) of decorative aesthetics supplier SJS Enterprises is in progress. The share sale opened today and will close on November 3. The price band for the offer has been fixed at Rs 531- Rs 542 per equity share.

The issue is entirely an offer for sale (OFS) issue by promoters. Evergraph Holdings Pte Ltd will sell Rs 710 crore worth of shares and K A Joseph will sell Rs 90 crore worth of shares via the OFS. Since the issue is entirely an OFS, the firm will not receive any proceeds from the issue.

After the IPO, promoters' stake will fall to 50.37 per cent from the current 98.86 per cent stake in the company. On the other hand, public holding will rise from 1.14 per cent to 49.63 per cent.

Allotment of shares will be done on November 10 and the firm is likely to make its market debut on November 15.

The lot size of SJS Enterprises IPO is 27 shares for which Rs 14,634 will have to be spent. A retail-individual investor can apply for up to 13 lots or 351 shares by spending Rs 1,90,242. Axis Capital Limited, Edelweiss Financial Services and IIFL Securities are lead managers for the issue.

On October 29, SJS collected up to Rs 240 crore from 18 anchor investors, including institutions such as Tara Emerging Asia Liquid Fund, Societe Generale, Nomura, Goldman Sachs and Citigroup. Domestic investors included Axis Mutual Fund, Franklin MF, Aditya Birla Sun Life Insurance, Avendus and Edelweiss.

Choice Broking has given a 'subscribe with caution call' for the issue.

"There are no peers in the listed space that are engaged in the business similar to that of SJS. At higher price band of Rs 542, SJS is demanding a P/E multiple of 31.7x (to its proforma FY21 EPS of Rs. 17.1), which seems to be on higher side.  Thus, considering the above observations, we assign a 'Subscribe with Caution' rating for the issue," said Choice Broking.

On the other hand, ICICI Direct has given a subscribe call to the share sale.

ICICI Direct said, "Strong financials and long-standing client relationships are key strengths that the company possesses. As of FY21, the company had cash and equivalents of Rs 119 crore, amounting to 7 per cent of sought market capitalisation. The company has generated a healthy 17-21 per cent RoCE over FY19-21 along with consistent CFO generation over in that timeframe."

On the flip side, IDirect said, heavy 2-wheeler exposure could act as growth headwind because "the 2-W space is experiencing sluggish demand conditions amid reduced spending propensity for the entry-level segment". The company earned 58 per cent of its revenues in FY21 from the two-wheeler segment.

"On a consolidated basis (inclusive of Exotech), SJS clocked EBITDA margins of 26.1 per cent in FY21 with RoCE at 19 per cent. At the upper end of the price band (Rs 531-542) it is valued at 32x FY21 P/E. We assign 'subscribe' rating on premiumisation play, strong financials," the brokerage house said.

Marwadi Financial Services says the valuations are 'reasonable' and assigned a 'subscribe' rating to this offer of the company.

SJS is one of the leading players in the Indian decorative aesthetics industry. The company is a 'design-to-delivery' aesthetics solutions provider with a diverse product offering for the automotive and consumer appliance industries.