What you must know about Hemant Surgical Industries IPO

Hemant Surgical Industries Ltd, is an SME IPO on the NSE which is opening for subscription on 24th May 2023. The company has a 34 year history, having been incorporated in the year 1989. It is primarily engaged in the business of manufacturing, importing, assembling, and marketing a complete and full-fledged product portfolio of medical equipment and disposables. Some of the products offered by Hemant Surgical Industries Ltd include products to address important areas like Renal Care, Cardiovascular diseases, Respiratory disease, Critical Care and Radiology etc.

The company typically imports products from Japan, China, France, and Australian and then processes them at their assembly units. The company currently has 1 manufacturing unit located at the Achad Industrial Estate while the 2 assembly units are located at Atgaon and in Bhiwandi in Maharashtra. Hemant Surgical Industries Ltd also has a fully equipped and state of the art quality control department with experienced and staff to ensure smooth manufacturing and assembly line processes. The fresh funds will be used for capex for additional machinery as well as for meeting the working capital needs of the company.

Key terms of the SME IPO of Hemant Surgical Industries Ltd:

Here are some of the highlights of the Hemant Surgical Industries Ltd IPO on the SME segment of the National Stock Exchange (NSE). 

•    The issue opens for subscription on 24th May 2023 and closes for subscription on 26th May 2023; both days inclusive. The stock is slated to list on the National Stock Exchange on 05th June 2023, in the NSE-SME segment.

•    The stock of the company has a face value of ₹10 per share and the IPO will be a book built issue for which the price band has been set in the range of ₹85 to ₹90 per share

•    The company will issue a total of 27.60 lakh shares, which at the upper end of the book building price band at ₹90 per share will aggregate to total issue size of ₹24.84 crore.

•    The overall issue will comprise entirely of a fresh issue of 27.60 lakh shares, which at the upper end of the book building price band at ₹90 per share will aggregate to fresh issue portion of ₹24.84 crore.

•    There is no offer for sale component in the IPO and the entire IPO is by way of fresh offer only. The fresh issue infuses fresh funds but is EPS dilutive. Offer for sale is just transfer of ownership and hence it is not EPS dilutive.

•    The allocation of shares to the various categories of investors will be as laid out in the table below.

•    The minimum lot size for the IPO investment will be 1,600 shares. Thus, retail investors can invest a minimum of ₹144,000 (1,600 x ₹90 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO.

•    HNI / NII investors can invest a minimum of 2 lots comprising of 3,200 shares and having a minimum lot value of ₹288,000. There is no upper limit on what the HNI / NII investors can apply for. There are no limits prescribed for the QIBs.

•    Like every SME IPO, this issue also has a market making portion with a market maker portion allocation of 144,000 shares. Hem Finlease will act as the market maker to the issue providing two-way quotes to ensure liquidity on the counter.

•    The company has been promoted by Hanskumar Shah, Kaushik Shah, and Hemant Shah. The promoter stake in the company stands currently at 100%. Post the IPO, being a fresh issue of shares, the promoter stake will be get diluted proportionately.

While Hem Securities Ltd will also be the lead manager to the issue, Bigshare Services Private Ltd will be the registrar to the issue.

Key dates to be aware of in the Hemant Surgical Industries Ltd IPO (SME)

The SME IPO of Quality Foils (India) IPO opens on Wednesday, May 24th, 2023 and closes on Friday May 26th, 2023. The Hemant Surgical Industries Ltd IPO bid date is from May 24th, 2023 10.00 AM to May 26th, 2023 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is the May 26th, 2023.
 

It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (applications supported by blocked amounts) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account.

Financial highlights of Hemant Surgical Industries Ltd

The table below captures the key financials of Hemant Surgical Industries Ltd for the last 3 completed financial years. 

The company has substantially improved its profit margins in the last 3 years and that is a positive development. Sales growth in the last 2 years has been robust. Above all, the company has a pedigree of 34 years and also an established model and the growing demand for this segment should help the company grow business rapidly. If the growth is sustained, the company is reasonably valued on FY23 and FY24 valuations. 

However, investors must remember that this is a traditionally low margin business where there is a lot of competition from the unorganized sector. That could be an overhang on valuations, so this stock would be best suited to someone with a longer term perspective or those with a higher risk appetite. Investors can take a call accordingly.