Archit Nuwood Industries Limited

Draft Red Herring Prospectus dated April 26, 2024

Summary

Archit Nuwood Industries Limited is making an initial public offer. The document does not yet state the price.

About 66% of the amounts stated for the objects go to investing in its wholly owned subsidiary company through equity infusion for consisting of plant and machinery, acquisition of land, meeting essential working capital requirements, and the construction of buildings and electrical installations, and about 17% to MDF Production Line HS CODE:84793000 - Beijing haoshang Technology Co., Limited, with smaller amounts for other objects. The amount for general corporate expenses is not yet stated.

The review found 9 points to read closely and 22 worth checking.

Read closely

1. Litigation exposure
2. Most of the proceeds pass down to a subsidiary
3. Issue is large relative to the existing business
4. Profit jumped in the year before the IPO
5. Material restatement adjustments
6. Cash conversion cycle is lengthening
7. Figures disagree between sections of the document
8. Projected revenue multiplies in a single year
9. Licences and approvals pending or expired

How the capital was built

• The last priced issue of shares was on 12 Dec 2023: 10,58,000 shares to non-promoter investors at ₹180 each (36 allottees, none stated as linked to the promoters), 6.1% of the pre-issue capital, at 25 times the price of the previous issue about 5 years earlier; it came 4 months before this prospectus.
• From the first priced issue (on incorporation, ₹7.14 in today's shares) to the last, the price per share rose 25 times over 6 years.

Conclusion

Of the 9 points to read closely, 1 concerns the promoters, management and their dealings (litigation exposure), 2 concern how the IPO money will be spent, 3 concern the financial statements and 3 concern the business, the valuation or the quality of disclosure. These could not be scored automatically and need reading: contingent liabilities; proceeds flow to promoters, group entities or related vendors; proceeds spent on property the company does not own. These wait for the price and the final share count: shares issued shortly before the IPO at a deep discount to the issue price; low promoter holding after the issue; issue price is a large multiple of promoters' cost. The pages to read are 18, 20, 62, 108–109, 114–115, 208–209 and 219.