Axita Cotton Limited IPO: Should you Invest in First SME IPO of 2019?

Axita Cotton Limited has planned to raise Rs. 10.51 crore through the issue of 1,752,000 Equity Shares. The Axita Cotton Limited IPO and the net issue will form 26.74% and 25.34% respectively of the post issue paid up equity share capital of the company.

Axita Cotton Limited Business Profile

• The company is under TUF (Technical upgradation fund), that have been approved by Textile ministry of India- Govt. of India) approved Ginning Pressing Company.
• Production facility of the company is located at Kadi in Mahesana District of Gujarat state close to the rich cotton growing areas of Maharashtra, Saurashtra and other regions of Gujarat.
• Member of Better Cotton Initiatives (Independent Organization) which promotes better standards in cotton farming and practices across various countries.
• The company sell its products directly to the end users in the state of Gujarat, Rajasthan, Maharashtra and Madhya Pradesh. Axita in FY 17 has also commenced exporting their products directly to few countries namely Pakistan, Bangladesh and Vietnam.
• They are also doing ginning and pressing of Kapas on job work basis and provide customized products as per requirements of the consumers.

Axita Cotton Limited IPO Detail

The object of the IPO is to fund the Net Incremental Working Capital Requirement of the company, Offer related expenses and general expenses of the corporate.

• Issue Open: December 27th, 2018 – January 2nd, 2019
• Issue Type: Fixed Price Issue IPO
• Issue Size: 1,752,000 Equity Shares of Rs 10 aggregating up to Rs 10.51 Cr
• Issue Price: Rs 60 Per Equity Share
• Market Lot: 2000 Shares
• Minimum Order Quantity: 2000 Shares
• Listing At: BSE Technical upgradation fund
• Listing Date: January 10, 2019

Should you Invest?

The company has installed 48 Ginning and Pressing machines that have capacity of processing 87,600 MT/Per annum of seed cotton. The company is also able to produce more than 500 cotton bales(170Kg) per day.

For FY 17, the company had delivered Rs 0.03 cr of net profit, in FY 18, the company posted Rs. 0.82 cr of profit and in the Q1 FY 19, the company has reported Rs. 0.33 cr of profit. The company’s P/E is around 18. The  revenue from operation has reached to Rs 12327.02 Lakhs in the FY 2017-18 as compared to Rs 1736.08 Lakhs in its first financial year after incorporation i.e. FY 2013-14. However, the major drawback is that the company is dependent on the  suppliers for products availability.

The investors that are risk averse should only “subscribe” to Axita Cotton Limited Ltd IPO.