Subscribe to S H Kelkar IPO for long term- review by Aditya Birla Money

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S H Kelkar and Company (SHK) has been in the fragrance industry for more than 90 years. The third generation of the promoter family is now actively managing the operations of the company. This provides the company a competitive edge over others in dealing across markets and geographies. SHK’s sales have grown at a CAGR of ~16% to ~ Rs 8.4bn while profit has grown by a CAGR of ~17% to ~ Rs 0.6bn during FY11-FY15. Funds from the IPO would be used mainly for re-payment / pre-payment of certain borrowings.

At the higher price band of Rs 180, the stock is valued at ~3.1x of its FY15 consolidated sales of ~ Rs 8.4bn. Given a) strong management background, b) high entry barriers and c) diversified customer base & product offering. We recommend “Subscribe” on SHK IPO for long term investors for one of its kind opportunity. However, current valuation leaves little room for short term investors to play for listing gains.