The Varhad Group. Yogya Enterprises Ltd. Company Overview. Industry Overview. Financial Overview CMP: INR5.50. Stock data. Stock performance (%)

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1 Comm. Trading & Distribution l SME Research Yogya Enterprises Ltd CMP: INR5.50 Stock data BSE code BSE ID YOGYA Face value (INR) 10 No of shares (m) 3.5 Market cap (INRm) m avg. daily vol (No) 1,476.9 Free float (INRm) 9.6 Dividend yield (%) 0.0 S&P BSE SME IPO 1,250.3 Stock performance (%) 52week H/L INR18.3/3.8 1M 3M 12M Absolute (%) Relative (%) Company Overview Yogya Enterprises Ltd. Is part of a diversified group Yogya which is engaged in trading, consumer internet, real estate and financial services. Engaged in Trading of IT Infrastructure, Metals and Fabrics, having turnover of more than 800mn. in Yogya Enterprises Ltd. Company provides total IT Infrastructure solutions for large, medium and small organizations in the public and private sector. Company s products include Hiend Servers, Desktops, Laptops, Routers and Switches. They also supply best Hot Rolled Coils, which have been widely appreciated because of their brilliant performance and highest industry standards. They also trade wide range of cotton fabrics in accordance with the industry set norms and standards which widely appreciated by clients and end users. Industry Overview Indian steel sector is the 4 th largest globally and is often considered as an indicator to the economic activity of a country. Steel sector which in recent times have faced challenges due to economic slowdown and high operating cost is on track again. Textile sector which has been one of the core sectors of India since many years has been one of the largest employment provider since ages. Shareholding pattern (%) Promoters FIIs DIIs Others 50.00% 0.00% 0.00% 50.00% Relative stock movement Financial Overview Revenue increased by 210.4% YoY from INR263.5m in to INR817.8m in. EBITDA margins decreased from 0.2% in to 0.1% in. In absolute terms, EBITDA increased from INR0.6m in to INR1.1m in. The Company reported a net profit of INR0.6m in compared to a net profit of INR0.2m in. Loans and Advance decreased from 4.1m in to INR1.3m in. Gross debt of the company decreased from INR1.7m in to INR0.4m in. In IPO, the company offered 10.0m shares of face value of INR10 per share. Table 1: Key financials Source: BSE (Y/e March) Sales (INRm) YoY Growth (%) EBITDA (INRm) EBITDA Margin (%) PAT (INRm) EPS (INR) YoY Growth (%) 1, RoE (%) P / E (x) Source: Company, Varhad Research Jan 2017

2 Industry Overview Industry size: The steel sector is one of the most crucial sectors in the development of a nation and is considered as the backbone of civilisation. The level of per capita consumption of steel is an important determinant of the socioeconomic development of the country. The Indian steel industry has entered a new development stage since and is riding on the resurgent economy and the growing demand for steel. India s 33% growth in steel production in the last five years was second only to China among the top five steel producing nations, according to data by World Steel Association (WSA). At the time of its release, the National Steel Policy 2005 had envisaged steel production to reach 110m tonnes by However, based on the assessment of the current ongoing projects, both in greenfield and brownfield, the Working Group on Steel for the 12 th Plan has projected that the crude steel steel capacity in the county is likely to be 140 mt by and has the potential to reach 149 mt if all requirements are adequately met. The National Steel Policy 2005 is currently being reviewed keeping in mind the rapid developments in the domestic steel industry (both on the supply and demand sides) as well as the stable growth of the Indian economy since the release of the Policy in The Government of India has allowed 100% foreign direct investment (FDI) under the automatic route in the steel sector. It has also reduced the basic custom duty on the plants and equipment required for initial setup or expansion of iron ore pellets plants and iron ore beneficiation plants from 7.5/5 % to 2.5%. Huge scope for growth is offered by India's comparatively low per capita steel consumption, the expected rise in consumption due to increased infrastructure construction, and the thriving automobile and railways sectors. After the expiration of the Multi Fibre Agreement on 1 st Jan 2005, the textile and apparel industry has witnessed a clear distinction between countries as production and consumption hubs. Developed countries like the USA, countries of the European Union and Japan have emerged as consuming countries while developing countries like India, China and Bangladesh are producing countries. Cheap labour is one of the most important factors driving the developing countries to gain production advantage. Growth drivers: Indian economy is expected to be the fastest growing economy for the next few decades. The growth could be primarily driven by infrastructure investments and the rising manufacturing and service sector. Within the service sector, the growing IT and banking sectors are expected to significantly add the demand for Commercial Real Estate. About ten million people are moving to Indian cities every year. Urban areas are expected to contribute 7075 per cent to nations GDP by Fiscal Shortterm outlook: Increasing urbanisation, demand for new housing, expanding spread of organised real estate and introduction of new construction technologies are some of the factors that are likely to be a pivot for the growth of steel industry in the country. Rising spending power especially among youth have given rise to textile industry. About the company Company is incorporated in Delhi as Yogya Enterprises Limited as on 16th September, 2010 as a public limited company under the provisions of Companies Act It is an ISO 9001:2008 certified company. The company is engaged in the business of trading and distribution of Steel, Copper and textiles products. They are a multiproduct trading company with a diverse product portfolio. They are the registered dealer in Metals, Bullions and Fabrics. They supply products, which are made with most advanced technology and graded raw materials. They are a professionally managed and growing organization which aims at strengthening and establishing itself as the foremost trader of steel, copper and fabric products in Delhi. They also aim at achieving greater and longterm growth. They offer a gamut of Metal products, which includes Hot rolled Steel, Copper Wire Rod, Copper Ingots and aluminum wire rods. They are also engaged in fabric trading our range includes fabrics for Silk, Polyester, Lace Fabrics, Netting Fabrics, Coarse Cotton Fabric, suiting, shirting, linen, jute and other fabrics.

3 Organisation structure Chart 1: Organisation structure Source: Company Board of Director Table 2: Composition of Board Source: BSE Name Director Type of Director Rajeev Gupta Director Managing Director Ms. Monica Gupta Director Non Executive Non Independent Director Shyam Sunder Aggarwal Director Independent Director Aditya Mehra Director Independent Director Key Strength and growth drivers Diversified product portfolio Strong managerial capability Cordial relations with Customers Adaptability of company in the fast changing environment Sound structured national network facilitates and the boom of iron & steel industry 3

4 Risk and concerns Competition from other developing countries especially from China Rising prices of materials Formation of cartels Government & regulatory norms Fluctuations in the material prices Slow growth in infrastructure development IPO Details In IPO, the company offered 10.0m shares of face value of INR10.0 per share. The IPO proceeds will be used to partfinance incremental working capital requirements, renovation & interior of our registered office, general corporate purposes and issue expenses. Table 3: Proposed usage of proceeds of IPO Particulars Proposed use (INRmn) To partfinance incremental working capital requirements 8.0 Renovation & Interior of our Registered Office 1.5 General Corporate purposes 2.5 Issue Expenses 3.0 TOTAL 10.0 Source: Company Financial Performance Revenue increased by 210.4% YoY from INR263.5m in to INR817.8m in. EBITDA margins decreased from 0.2% in to 0.1% in. In absolute terms, EBITDA increased from INR0.6m in to INR1.1m in. The Company reported a net profit of INR0.6m in compared to a net profit of INR0.2m in. There was operating cash outflow of INR2.4m in compared to operating cash outflow of INR28.9m in. Sundry debtors decreased from INR22.9m in to INR11.0m in Loans & Advances by the company decreased from INR4.1m in to INR1.3m in. Provisions and other current liabilities decreased from INR0.5m in to INR0.3m in. 4

5 Competition analysis YOGYA operates in a highly competitive market and the growth in the market is determined by the drivers of domestic economy, government rules and regulations, purchasing power of the customers and interest rate risk. Table 4: Peer comparison Company CMP (INR) Mcap (INRm) Rev (INRm) EBITDA Margin (%) EPS (INR) PE (x) Yogya Enterprises Ltd Redington (India) Ltd , ,26, Minal Industries Ltd Mahashree Trading Ltd Source: BSE Valuation On valuation front, preipo basis, the company is trading at 44.3x PE. The EPS is INR0.2, whereas EBITDA margin is 0.1%. 5

6 Financial snapshot Chart 1: Sales trend Chart 2: Margin trend Sales (INRm) 1, Sales (% YoY, RHS) EBITDA (INRm) EBITDA mgn (%, RHS) Chart 3: EPS trend Chart 4: Working capital profile EPS (INR) EPS Growth(% YoY, RHS) Debtors TO Stock TO Creditors TO ,500 2,000 1,500 1, (500) Chart 5: Return trend Chart 6: Valuation 5% ROE (%) ROCE (%) 4% 3% 2% 1% 0% FY1 4 FY1 5 FY PE EV/EBITDA P/B (RHS) Source: Company, Varhad Research 6

7 Financial Summary Profit and loss (INR m) Balance sheet (INR m) Year ending 31 March Year ending 31 March Revenue Net Block Direct Cost Investments Staff Cost Cash and Banks Balance Other Expenditure Inventory Total Cost Sundry Debtors EBITDA Loans and Advances EBITDA margin (%) Other Current Assets Depreciation Other EBIT Total Assets Interest Expenses Gross Debt Nonoperating Income Trade Payables PBT Provisions & other curr lia Provision for Tax Others PAT (Adjusted) Equity Capital Growth % 1, Reserves & Surplus PAT margin (%) Share Application money Minority Interest Minority Interest Extra Ordinary Shareholders' funds PAT (Reported) Total Liabilities Cash Flow Metrics Ratios, growth and per share analysis YoY % change Profit before Tax Revenue Operating Cash Flow EBITDA Investing Cash Flow Recurring EPS 1, Financing Cash Flow Ratios (%) Net Change in Cash ROE Cash at the beginning ROCE Cash at the end of year EBITDA Margin Ratio Du Pont Analysis Net Debt/Equity (x) Net Debt/ EBITDA (x) Net Profit Margins (%) Inventory days Total Assets Turnover Debtors days Leverage Multiplier Payables day ROAE (%) Total Asset TO ratio Valuation Fixed Asset TO Ratio Per share data (INR) EV/Sales EPS reported (diluted) EV/EBITDA Recurring EPS (diluted) P/E (x) DPS P/B(x) Book Value(basic) Dividend yield (%) Wtd avg ord shares (m) FCF yield (%) Wtd avg dil shares (m) Source: BSE, Company, Varhad research 7

8 DISCLAIMER Varhad Financial Consultancy Services Private Limited (Varhad FCS), an entity of the Varhad Group has taken utmost care to ensure accuracy and objectivity while writing this report based on publicly available information or from reliable sources. However, neither the accuracy nor completeness of information contained in this report is guaranteed. Opinions expressed herein are our current opinions as on the date of this report. Nothing in this report can be construed as either investment or any other advice or any solicitation, whatsoever. The subscriber/user assumes the entire risk of any use made of this report or data herein. Varhad FCS specifically states that it or any of its entities or employees do not have any financial liabilities whatsoever to the subscribers / users of this report. This report is for personal information only of the authorised recipient in India only. This report or part of it should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied for any purpose. DISCLOSURE Each member of the team involved in writing this research report, hereby affirms that there exists no conflict of interest that can bias the research on the company. PUBLISHED BY Varhad Financial Consultancy Services (VFCS) is the research and financial consultancy services entity of the Varhad Group. We have one of the best inhouse research team, which has sound understanding of SMEs through clients across India. We provide project specific, company specific and sector specific consultancy services. We help companies expand businesses through network expansion. We also help in balance sheet strengthening and improvement in both credit and business profile of the company. Regd. Office: Flat No. 1, Harsh Apartment, Near Gore Apartment No. 2, Shastri Nagar, Behind Akashwani, Akola Head Office: #441, Samruddhi, Sector 25, Bhel Chowk, Nigdi, Pune Tel: SEBI Certificate of Registration as Research Analyst Registration No: INH Dated: 25 May