Davin Sons IPO GMP Today: If you’re an IPO investor, welcome back to another insightful update. Today, we’ll discuss the SME IPO by Davin Sons Retail Limited, which is closing today. Let’s dive deeper into what makes this IPO interesting and whether it’s worth considering.
Also Read : https://active-investors.com/quadrant-future-tek-ipo-gmp-review/
Business Overview
Davin Sons Retail Limited is a dual-product company. It operates in two distinct segments:
- Clothing Manufacturing: The company manufactures garments for other brands. This business line primarily focuses on designing and producing clothes according to specific requirements.
- FMCG Distribution: The company distributes fast-moving consumer goods. This involves supplying products from manufacturers to retail outlets.
Both these segments are vastly different in nature. On one hand, garment manufacturing is a high-value industry with substantial opportunities, especially as global manufacturing hubs are shifting due to challenges in countries like Bangladesh. On the other hand, FMCG distribution typically operates on thinner margins and is highly competitive.
Despite operating in unrelated sectors, the company is striving to find a balance between these two ventures.
IPO Details
- Opening Date: January 2, 2024
- Closing Date: January 6, 2024
- Issue Size: ₹55 lakh
- Market Maker Portion: ₹5 lakh
- Retail Portion: ₹4.17 crore (47.4%)
- HNI Portion: ₹4.17 crore (47.4%)
- Lot Size:
- Retail Investors: 2,000 shares (₹1,00,000 per lot)
- HNI Investors: 4,000 shares (₹2,00,000 per lot)
The subscription requirement for a single application in the retail category is 379 applications, whereas it’s 189 for HNI investors. If combined, fewer than 600 applicants could fulfill the issue’s subscription requirements. This raises questions about its attractiveness and demand.
Financial Performance
Revenue Growth
- FY 2023: ₹3.91 crore
- FY 2024: ₹13.9 crore
- Till September 2024: ₹6.34 crore
Profit Trends
- FY 2023: ₹1.64 lakh
- FY 2024: ₹1.64 crore
- Till September 2024: ₹3.59 lakh
If the current trajectory continues, the company may close FY 2024 with profits nearing ₹1 crore. However, debt remains a concern at ₹1.94 crore. While revenue and profit growth seem promising, the high debt could impact long-term sustainability.
Key Observations
Strengths
- Sales Growth: The revenue has increased significantly over the years.
- Profitability: Profits have improved, showing the company’s ability to manage costs.
- Opportunity in Garment Manufacturing: With shifts in global manufacturing trends, there is potential for growth in this segment.
Concerns
- Unrelated Business Segments: Combining garment manufacturing with FMCG distribution seems disconnected. This lack of focus could dilute the company’s core strengths.
- No Peer Group: The company has not disclosed peers for comparison, making it harder to evaluate its market position.
- Debt Levels: The company’s debt of ₹1.94 crore may limit its ability to invest in future growth.
Lead Manager Analysis
The lead manager for this IPO is Navigate Corporate Advisors. Historical data shows mixed performance for issues managed by this firm. For example:
- Falcon Concept IPO (2024): Issued at ₹62, listed at ₹90, but saw a sharp decline with multiple lower circuits.
- Other 2023 IPOs: 80% of the IPOs managed by Navigate Corporate Advisors are trading below their issue price, indicating poor long-term performance.
Investors should consider this track record before trusting the lead manager’s ability to guide this IPO successfully.
Promoter Background
The promoters of Davin Sons Retail Limited have 12 years of experience in the business. Initially operating as a proprietorship, the company transitioned into a private entity in 2022. This raises questions about its long-term stability and growth potential, as it’s relatively new in its current structure.
Key Red Flags
- No Anchor or QIB Participation: The absence of Qualified Institutional Buyers (QIBs) or anchor investors signals weak institutional confidence. Historically, IPOs without QIB interest underperform.
- HNI vs. Retail Subscriptions: If HNI subscriptions are lower than retail, it indicates a lack of interest from high-net-worth individuals, often a red flag.
- Market Maker History: The market maker’s past performance is average, with most stocks trading below their issue price.
- Limited Scalability: With a paid-up capital of ₹5.26 crore, the company is unlikely to migrate to the main board in the next three years.
Personal Take
As someone who has closely observed IPOs for years, I’ve learned the importance of evaluating lead managers, market makers, and the company’s business model. I recall investing in a similar SME IPO where the lead manager’s poor track record resulted in significant losses. That experience taught me to avoid IPOs with questionable management and weak fundamentals.
Davin Sons’ dual business model reminds me of another company that struggled to balance unrelated segments. While garment manufacturing holds promise, FMCG distribution seems like a distraction rather than a complementary business.
Final Verdict
Investors should consider the following before applying:
- Avoid IPOs Without QIB or Anchor Participation: 80% of such IPOs fail to deliver long-term value.
- Check HNI Subscriptions: If HNI interest is low, avoid the IPO.
- Focus on Lead Manager’s History: Navigate Corporate Advisors’ track record is not reassuring.
- Evaluate Business Sustainability: The company’s unrelated business segments and high debt raise concerns.
Conclusion
Davin Sons Retail Limited’s IPO may not be suitable for all investors. The company’s business model lacks focus, and its lead manager’s track record is questionable. Unless you are willing to take high risks, it’s best to observe how this company performs post-listing.
Happy investing, and remember to research thoroughly before making any decisions!