SGMART is a B2B one-stop shop that provides a wide range of construction-related solutions from top brands under one roof. The company aims to establish itself as the trusted and preferred platform for all infrastructural and building material needs in India.
History:
The company used to be Kintech Renewables. The company was earlier engaged in activities relating to the renewable energy sector. The promoters then were Aditya Singhal, Saurav Singhal, Ambala Patel and Jigar Shah.
In April-23, New promoters Meenakshi Gupta and Dhruv Gupta bought out the company for INR 22 crs. The promoters belong to the APL Apollo group family.
Products:
TMT Bar, MESH NET, Binding Wire, Welding Rod, Steel Tube, Sanitaryware, Bath fittings, Laminates, Galvanised Sheet, HR Coil & Sheet, All Ceramic Range of Tiles, Premium Tiles Adhesive & Grouts, Double Charge Tiles division, Home appliances, Lighting for Domestic, Commercial & Industrial applications, LED Lighting, Fans, Modular Switches & Wiring Accessories, Water Heaters, Industrial & Domestic Circuit Protection Switchgear, and Industrial & Domestic Cables and Wires. Looking ahead, the company plans to expand its product line, adding Barbed Wire, MS Bar, Angle, ISMC Channel, ISMB Beam, and Patti Flat.
Brands being sold:
4 large brands- APL Apollo TMT bars, Kajaria Tiles, Havells electricals, SG premium
Other Brand partners- NMDC, JSW Steel, Jindal Steel and Power, Hindustan Zinc, Godawari Power and ISPAT, Triveni Enterprises, etc.
Industry dynamics:
Industry issues:
Industry size:
| Segment Product | Market Size, FY24 | FY2027E | |
|---|---|---|---|
| Downstream Steel | 4.1 Trillion | 5.6 Trillion | |
| Fixtures & Fittings (Bath fittings, Electrical fittings) | 1.3 Trillion | 1.8 Trillion | |
| Tiles industry | 0.4 Trillion | 0.6 Trillion | |
| Total | 5.8 | 8 |
Other Investors and fund raising:
In Nov-23, The company raised equity shares worth 878 crs, at Rs 5000 per share, Rs. 10 face value. The top allotees from this were:
| Allottees | No of equity shares | Value (in crs) |
|---|---|---|
| Kitara PIIN 1103 | 202,000 | 101 |
| Plutus Wealth Management LLP | 200,000 | 100 |
| QRG investments and Holdings Ltd | 100,000 | 50 |
| Blue Foundry Advisors LLP | 100,000 | 50 |
| Vallabh Bhanshali | 50,000 | 25 |
| SageOne-Multiple | 50,000 | 25 |
| Turnaround opportunities fund | 40,000 | 20 |
| Abbakus | 80,000 | 40 |
| Rikeen P Dalal | 30,000 | 15 |
| 360 One special Opp Fund | 30,000 | 15 |
| Mukul Mahavir Agarwal | 30,000 | 15 |
| Ashok Goel Trust | 24,000 | 12 |
| High Conviction Fund | 20,000 | 10 |
| Madhuri Madhusudhan kela | 20,000 | 10 |
| Top allottes | 976000 | 488 |
The company also issued warrants at the time, at Rs 5000 per share to non-promoter category:
| Particulars | No of shares | Value (in crs) |
|---|---|---|
| Rohan Gupta | 382,000 | 191 |
| Marigold Partners | 90,000 | 45 |
| Shivkumar Bansal | 75,000 | 37.5 |
| Rohit Gupta | 50,000 | 25 |
| Deepak Kumar | 25,000 | 12.5 |
| Anubhav Gupta | 25,000 | 12.5 |
| Kanhaiya Sharma | 10,000 | 5 |
| Anjana Bansal | 10,000 | 5 |
| Arun Agarwal | 10,000 | 5 |
| Payal Jain | 10,000 | 5 |
| Ravindra Kumar | 10,000 | 5 |
| Chakram Singh | 5,000 | 2.5 |
| Amit Kapoor | 5,000 | 2.5 |
| Bhanu Singh | 5,000 | 2.5 |
| Utkarsh Dwivedi | 5,000 | 2.5 |
| Ankit Jain | 3,000 | 1.5 |
| Atul Jain | 3,000 | 1.5 |
| Total | 723,000 | 361.5 |
In February 2024, the company split the stock 10:1, and issued bonus shares on the same.
Financials:
The new company started operations in June 2023, and since has had 4 quarters of operation.
| Particulars | Q1FY24 | Q2FY24 | Q3FY24 | Q4FY24 | FY24 |
|---|---|---|---|---|---|
| No. of customers | 170 | 315 | 426 | 444 | |
| Net Revenue | 150 | 506 | 748 | 1277 | 2681 |
| Raw Material cost | 147 | 493 | 728 | 1238 | 2606 |
| % of rev | 98.00% | 97.43% | 97.33% | 96.95% | 97.20% |
| Gross profit | 3 | 13 | 20 | 39 | 75 |
| GP Margin | 2.00% | 2.57% | 2.67% | 3.05% | 2.80% |
| Employee cost | 0.5 | 0.9 | 0.15 | 0.21 | 1.76 |
| Other expenses | 0.7 | 0.2 | 0.1 | 0.52 | 1.52 |
| EBITDA | 1.8 | 11.9 | 19.75 | 38.27 | 71.72 |
| EBITDA Margin | 1.20% | 2.35% | 2.64% | 3.00% | 2.68% |
| Other income | 0 | 1.1 | 9.6 | 20.9 | 31.6 |
| Interest Cost | 0.1 | 0.3 | 3.4 | 7.9 | 11.7 |
| Depreciation | 0 | 0.1 | 0.1 | 0.3 | 0.5 |
| PBT | 1.7 | 12.6 | 25.85 | 50.97 | 91.12 |
| Tax | 0.4 | 3 | 6 | 10.9 | 20.3 |
| Tax rate | 23.53% | 23.81% | 23.21% | 21.39% | 22.28% |
| Net Profit | 1.3 | 9.6 | 19.85 | 40.07 | 70.82 |
The company has given a guidance of reaching INR 18,000 crs of revenue in FY27.
In typical APL Apollo group company fashion, it works on negative working capital (-5 days)
Thesis:
Risks:
Disclosure- Invested
35 Likes GRP 2How it’s different from Shankara. It also has some stake of apl Apollo
sougataG 3APL APOLLO MART seems to be in a similar line of business, so what could be the reason for them to start SG Mart, when APL MART was already up? How well are they placed with unlisted players like Market.infra?
2 Likes antson_m 4The new promoters are family of APL Apollo.
@Akshada_Deo PE basis FY24 financials wont be the right picture. Major part of revenue & profits for FY24 was made only in Q4 post management change. So forward PE for FY25 will be significantly low assuming if Q4 replicates for 4 quarters of FY25. If the Q4 business is extrapolated for FY24, then earning is 4 time the earning of Q4.
Shankara is primarily expanding into retail, B2C
3 Likes ajay81 6Found it strange for such a newly set up company, Promoter is selling shares so frequently; they have sold 1.4 cr shares over last 4 months; and have taken out much more money than what they have invested (incl warrants);
SG Logistic mgmt: buys 25 lakh shares from the Promoter on 27th june @ 440 per share but on 9th july sells 9 lakh shares @ 425 per share so much for long term investing,another weird thing is that this company was formed just two years back with a similar name as sgmart…it looks like a related party entity even though not shown as promoter grp so free to keep on selling shares without any major disclosures . source: Sg Logistic Management Private Limited - About (check shared directorship)
APL apollo’s promoters have a history of buying companies with almost nil revenue instead of opening up new ones. Similar was done with SG finserve as well.
As far as fundraising is concerned, my estimation is theyd rather sit on funds and use them immediately at need rather than do fundraising when the need arises.
3 Likes ajay81 8 Akshada_Deo:at need rather than do fundraising when the need arises.
Am not talking abt fund raising by company at all. that in my opinion is good for the company. am talking abt promoter individually selling their shareholding: (source: screner)
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yes thats right, if they can continue the momentum valuation is not a concern
1 Like antson_m 10Not sure, but looks like some internal family rearrangement. I could be wrong. Under public, Neera Gupta has acquired 12%.
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Another interesting part is that Havell’s promoter group Qrg Investments and Ashish Kacholia has a stake in this company!
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And Neera Gupta is Apl chairman’s wife
ajay81 13Neera gupta shareholding is coming from Sahil gupta; Sahil gupta used to own 13.45% in dec shareholding now he owns only 1.34% and 12.1% is ownd by neera gupta in June shareholding
4 Likes antson_m 14Not sure, there is gap of 1qtr. The names I’m suspicious of related transactions. After this there is still gap of 24% from the Sept holdings of 94%. Pls note we cant see below 1% transactions. What are they doing
Hope annual report will give better clarity
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Their website is still under development. Where are they selling these products? Isn’t that supposed to be online ? Right now we are not able to view prices of different products that they have. This industry deals with lot of cash and that is one of the biggest reasons why this sector is largely unstructured and unorganized. If you start selling these products online then all the transactions are booked and cash dealings become difficult. If SG Mart is able to sell these products online and change the way this industry works then it could be a game changer but it will have its fair share of struggles and challenges.
4 Likes saurabhgupta 162027 guidance- 180bn= 18,000 cr sales ,
so PAT 2% will be 360cr,
so EPS - 360/11.2=32.14 ,
so forward FY27 P/E will be - 400/32.14=12.4
Ratios of this company is better than Shankara buildpro.(Debtor days, receivables etc)
saurabhgupta 1875% holdings in strong hands ie 11.2 cr ka 75%=8.4cr.
Public float =11.2cr-8.4cr=2.8cr.
My query is when there is decent public float available then why this stock trade in circuit to circuit?
Ketan_Chheda 19They have huge cash which is earning them “other income”…so by 2027 that other income may not be there…pls note that operating and net margins cannot be the same…IF at all they have no interest expense and depreciation as well as no other income, they still need to pay tax…so PAT margin will not be equal to Operating Margin.
3 Likes saurabhgupta 20Sir going forward OPM will also not remains the same and shankara buildpro has average PAT margins of 1.5-2% ,but shankara has bad ratios and SG Mart having good ratios (negative cash conversion days) we can give it PAT margins of 2%(if you want to become more conservative then you can use 1.5% as well).If still i am wrong anywhere please feel free to interact.
2 Likes