TLDR;
This YouTube video by Sunday Investing discusses two upcoming IPOs: Shreeji Global FMCG (an SME IPO) and Studds Accessories (a mainboard IPO). The hosts share their analysis and investment plans for each company, focusing on their business models, financials, growth potential, and potential risks. They are inclined to apply for Studds Accessories IPO, but not for Shreeji Global FMCG IPO. They also mention an upcoming discussion on the Lens card IPO.
- Shreeji Global FMCG: Not inclined to apply due to low margins, lead manager repute, and lower QIB quota.
- Studds Accessories: Inclined to apply due to niche segment, reasonable valuations, and good investor backing.
- Lens card IPO: A separate discussion is planned for this IPO due to high public interest.
Opening Remarks [0:00]
The hosts kick off the "Primary Market Chatter" with a focus on the first week of November IPOs. They highlight three major raises: Studds, Lens card, and Grow, along with the SME IPO of Shreeji Global FMCG. The discussion will cover Studds and Shreeji Global FMCG, with a dedicated session for Lens card due to significant public interest. They acknowledge the Women's World Cup final and may adjust the Lens card discussion time accordingly. The hosts remind viewers that this is their personal strategy and not financial advice, encouraging individual research and due diligence. They also promote their YouTube and Instagram channels for IPO-related content.
Shreeji Global FMCG (SME) [3:34]
Shreeji Global FMCG, incorporated in 2018 and based in Rajkot, Gujarat, deals in spices, grains, pulses, flour, and other food products under the brand name SG. The third generation of the family is leading the business, which dates back to the 1980s. They procure raw materials from farmers and process them into various products, selling primarily to B2B clients, including retailers, wholesalers, distributors, and some institutional clients, with a presence in both domestic and export markets. The company is also targeting D2C vertical. The IPO consists entirely of a fresh issue, with a market cap of ₹285 crores and a dilution of 30%.
In FY25, Shreeji Global FMCG had revenues of ₹650 crores, but very low PAT margins of around 2%. The company's financials show revenue growth from ₹469 CR in FI23 to ₹649 CR in FI25, with a slight improvement in PAT margin due to operational efficiencies. The operating cash flow supports the steady increase in margins. Risks include low margins due to a focus on B2B sales, inventory turnover of 3.5 to 4 times, and receivables getting stuck. The IPO proceeds will be used for new machinery, a new manufacturing plant with cold storage, a solar plant, and working capital. The IPO is priced at 23-24 times FI25 earnings, with the lead manager, Interactive Financial Services, potentially considering FI26 projections. The hosts are not inclined to apply due to the competitive landscape, past performance of similar SME IPOs, and concerns about fully utilizing working capital limits in FI26.
Studds Accessories (Mainboard) [12:21]
Studds Accessories, incorporated in 1975, is the world's and India's largest two-wheeler helmet manufacturer. It holds a 27% market share in India by volume and 11% globally. The company manufactures and markets helmets under the Studds and SMK brands, with Studds being the mass-market brand and SMK the premium brand. They also sell accessories like luggage, gloves, and riding jackets. Studds exports to over 70 countries and has three manufacturing facilities with a combined capacity of 9.04 million helmets per annum. In FI25, they sold 7.4 million helmets, utilizing 82.5% of their capacity. 92.8% of the revenue comes from helmets and 7.2% from accessories. The company also supplies to OEMs like Yamaha, Honda, Hero, Suzuki, and Eicher, and has exclusive contracts with the Indian Army and police canteens.
The IPO is a ₹455 crore offer for sale (OFS). The company generates ₹60-70 crore of free cash flow per annum and doesn't need to raise funds. They are already undertaking a capex for unit four, which will increase capacity by 30-35%. In FI24, the company had a revenue of ₹529 crores, EBITDA of ₹90 crores, and PAT of ₹57.2 crores. In FI25, revenue grew to ₹595 crores, EBITDA to ₹105 crores, and PAT to ₹69.6 crores. SMK brand has been growing at 80% in FI25. The company is vertically integrated, with EPS manufacturing, stitching, decal, and plastic molding facilities. Growth levers include entering new geographies, bicycle helmets, and Bluetooth helmets. The IPO is valued at 32-33 P/E based on FI25 numbers, but considering potential growth, it comes to around 23 P/E. The anchor book included names like Kara Capital, HDFC Mutual Fund, and Nippon. The hosts are inclined to apply for the IPO due to reasonable valuations, good investor backing, and the company's position as a world leader in a niche segment.
Closing Remarks [35:13]
The hosts summarize their investment decisions, noting their inclination towards the Studds IPO due to its small issue size and potential for reasonable listing gains. They announce a discussion on the Lens card IPO for the next day, anticipating a lively debate. They reiterate the importance of following their YouTube and Instagram channels for updates and IPO-related content. They conclude by thanking the viewers for joining and expressing excitement for the upcoming Lens card discussion.