Scotts Garments Limited – Intial Public Offering (IPO)

SCOTS GARMENTS INTIAL PUBLIC OFFERING:

Scotts Garments Limited is incorporated in 1992; it’s a Bangalore, Karnataka Based Company. Mr. Naseer Ahmed is the Chairman and Managing Director of the Scots. It’s Business of garment manufacturing. In addition to manufacture superior quality garments, company also provides additional facilities such as embroidery, printing, dyeing and washing. Scotts Garments export their readymade knitted and woven apparel to international clients including Denmark, Gander Mountain – USA, S Oliver, Frankfurt, C&A buying and Germany.

The Company Scotts Garments is specializing in tailor made products for men, women & kids. Products manufactured by the Company includes Shirts (Cotton & Denim) Tops, Skirts, Trouser (Cotton & Denim), Shorts, Cargos, Knitted Garments, T-Shirts (Basic and Embroidered), Sweats and Jerseys. They export their quality products to several MNC’s into more than 20 countries across the Globe. They have set up an exclusive display showroom at Apparel Export Promotion Council in Gurgaon.

Scotts has also set up a 2.1 M.W capacity windmill at Bellary in Karnataka State. Scotts Garments has also entered into Wheeling and Banking agreement with Gulbarga Electricity Supply Company Limited for the sale of the power generated through the wind mill. The company has also signed a Wheeling and Banking agreement with Tamil Nadu electricity board for the sale of power through wind mill at Tirunelveli District in Tamil Nadu.

Objects of the Issue:

1. Scenery up of unit for Trouser manufacturing and Knitting and Fabric Processing at Doddaballapur in

Karnataka State.

2. Margin Money for working capital of new unit.

3. General corporate purpose and Meet the issue expenses.

Issue details:

  • IPO opens: 25-29 Apr 2013
  • Issue Type: 100% Book Built Issue IPO
  • Price band: Rs. 130 to Rs. 132 per share
  • Face value: Rs. 10
  • Issue Size: 10,506,954 Equity Shares of Rs. 10
  • Minimum bid: 100 shares
  • Minimum investment: Rs. 13,000
  • Lead managers: Canara Bank and Keynote corp. services Ltd
  • Registrar: Link Intime India Pvt Ltd
  • Listing: BSE / NSE
  • CARE Rank:  Grade 3 to this IPO indicating at average fundamentals of the company.

Company Financial Review:

  1. Scotts Garments has posted 13% to 18% annualized growth in terms of revenue in the last five years. The revenues have increased from Rs. 503 Crores (FY2010-2011) to Rs. 566 Crores (FY2011-2012).
  2. Scotts Garments has been operating around 7% margins up to FY 2010-11. For FY2011-12, the margins showed a vertical jump to 14.85% due to increase in extra income. For Seven months ended Oct 12, the margins are at 6.09%. The margins are stabilized around 6% -7% in the last five years.

SCOTT GARMENT S  – FINANCIALS

Financials

2008-03

2009-03

2010-03

2011-03

2012-2003

7 Months Ending                  Oct-2012

Revenue [Rs in Lakhs]

33,275.95

37,443.56

43,458.98

50,348.88

56,613.29

33,533.11

Profit [Rs in lakhs] after Tax

2,224.75

2,721.48

2,784.24

3,493.06

8,403.95

2,041.95

Profit %

6.69%

7.27%

6.41%

6.93%

14.84%

6.09%

Revenue Growth % YoY

13%

16%

16%

12%

18%

Year Ended

EPS [Rs.]

WEIGHT

March 31, 2010

10.41

1

March 31,2011

13.06

2

March 31,2012

31.43

3

Weighted Average EPS

21.80

  • Minimum Investment is Rs. 13,000/- [Thirteen Thousand Rupees Only] any Investor can manage to pay for Invest which is a good Sign.

Conclusion/Asset Strategy:

  1. In BRLM’s performance front, Keynote Corporate had mandate for 17 IPOs out of which 8 failed to give listing day gains. For Canara Bank this is perhaps first mandating after very long.
  2. If we characteristic the annualized earnings on the post IPO equity base of Rs. 38.98 Crores then the issue price is at a P/E of 14.5x. Its peers are trading between 10x to 16x which indicate that the issue price is insistently priced. Although company has been doing well in terms of revenues and margins, due to its high issue price.
  3.  Even though garment industry is balanced for bright prospects ahead as per recent budget, bearing in mind listing in “T “group for initial period, it is better to buy at discount after post listing.

IPO – Ashapura Intimates Fashion

ASHAPURA INTIMATES FASHION

INTIAL PUBLIC OFFERING {I.P.O}

Company Background:

Reputable in 2006, Ashapura Intimates Fashion Ltd and the Chief Promoter was Mr. Harshad H. Thakkar and the Company is engaged in the business of designing, branding, marketing and retailing intimate garments such as loungewear, bridal night wear, honeymoon sets, bathrobes and night wear.

The Company Ashapura Intimates sell their products such as loungewear, bridal night wear, honeymoon sets and bathrobes under the brands “Valentine” and “N-Line”. Also night wear, maternity feeding night wear and bridal night wear (two pieces) are marketed under the brand “Night & Day” and sportswear, women’s innerwear and lingerie’s under the brands “Valentine Sportswear”, “Valentine Secret Skin” & “Valentine Pink”. Company has in house design studio for developing products and creating styles to remain updated on consumer tastes and fashion trends.

Ipo Highlights:

  1. In the direction of set up Ten Exclusive Brand Outlets
  2. Toward fund branding and marketing set-up
  3. To Investment in the equity shares of our Group Company
  4. In the direction of fund modernization of machineries
  5. To meet incremental working capital requirements
  6. Intended for general corporate purposes
  7. To meet Issue expenses

Ipo Details:

  1. Issue Open: 28Mar’ 2013
  2. Issue Closes: 04Apr’2013
  3. Issue Type: Fixed Price Issue IPO
  4. Issue Size: 5,250,000 Equity Shares of Rs. 10 Each
  5. Issue Size: Rs. 21.00 Crore
  6. Face Value: Rs. 10 Per Equity Share
  7. Issue Price: Rs. 40 Per Equity Share
  8. Market Lot: 3000 Shares
  9. Minimum Order Quantity: 3000 Shares
  10. Listing At: Bombay Stock Exchange Small and Medium Enterprises {SME}

Ipo Digest:

Possibly the last IPO for Fiscal 2012-13 is from BOMBAY STOCK EXCHANGE SMALL AND MEDIUM ENTERPRISES Platform that is likely to bid farewell to the primary market. With this the total tally for BOMBAY STOCK EXCHANGE SMALL AND MEDIUM ENTERPRISES IPOs will be 23 during the first year of SMALL AND MEDIUM ENTERPRISES {SME} platform.

The Ashapura Intimates Fashion Limited is in the business of designing, trading, job contract manufacturing, branding, marketing and selling of intimate garments such as loungewear, bridal night wear / honeymoon sets, bathrobes and nighties since amalgamation. An Ashapura Intimates Fashion Limited expanded its product portfolio by adding other intimate garments such as sportswear, women’s innerwear including lingerie. It now plans to foray into a new product category i.e. kids’ innerwear having cartoon characters.

 The Ashapura Intimates Fashion Limited products such as loungewear, bridal night wear, honeymoon sets and bathrobes under the brands “Valentine” and “N-Line” are available through our large network of distributors to our customers in India as well as other countries. Its products such as nighties, maternity feeding nighties and bridal night wear (two pieces) are marketed under the brand called “Night & Day”. Further in the year of 2011, the company  started marketing of sportswear, women’s innerwear and lingerie’s under the brands “Valentine Sportswear”, “Valentine Secret Skin” & “Valentine Pink” respectively by leveraging its existing marketing network.

An Ashapura Intimates Fashion Limited’s Now proposes to muster Rs. 21 crore to set up Ten Exclusive Brand Outlets, fund branding and marketing set-up, modernizations and investment in group companies along with other general corpus fund. For this it is coming out with an IPO of 5250000 equity share of Rs. 10 each at a fixed price of Rs. 40 each. KJMC Corporate Advisors (India) Ltd is the sole manager to this offer and Link In time India Pvt. Ltd. is the registrar to the offer. CARE has assigned ‘ SMALL AND MEDIUM ENTERPRISES Fundamental Grade 4’ to this IPO indicating very good fundamentals. Post allotment, the shares will be listed on Bombay Stock Exchange SMALL AND MEDIUM ENTERPRISES platform. The novel face value of Rs. 100 per share was spitted in Rs. 10 in October 10. Between 2009-2011 March. It made preferential allotments at a price between Rs. 1000-2850 per share and In March 2012 it allotted shares at par. It also issued two bonus shares in the ratio of 5 for 1 in March 2012 and 1 for 1 in October 2012.

Company Valuation:

Resting on company’s performance front, for the last three fiscals it posted an average EPS of Rs. 6.7 and Net Asset Value as on 31.03.12 is at Rs. 20.68. This will get diluted on post bonus issue. For first half of current fiscal it has earned net profit of Rs. 1.65 crore on a turnover of Rs. 57.47 crore. If we attribute this on annualized basis on the post Initial Public Offering equity of Rs. 19.47 then the issue is at a P/E of 22 plus point which is higher compared to its gaze.

Ipo Conclusion:

Lying on merchant banker’s mandate front, possibly this is the first permission and there is no past track record. Due to entry fence and higher pricing. It is better to AVOID.

IPO – Opal Luxury Time Products Limited

IPO - Opal Luxury Time Products Limited

OPAL LUXURY TIME PRODUCTS LIMITED

INTIAL PUBLIC OFFERING {I.P.O}

Company Background:

Integrated in 2007, Opal Luxury Time Products Ltd is engaged in manufacturing and marketing of home decor products. Currently Opal design and manufacture wall & table clocks and market them under two brands, the premium brand ‘Opal’ and budget brand ‘Caliber’.

They offer 109 styles of clocks under their brand ‘OPAL’ those ranges from Rs 1450-27500. Also they have 31 styles of clocks under ‘Caliber’ brand with average price of Rs 370. Company is headquartered in Pune and currently has a manufacturing facility in the industrial area of Roorkee of Uttarakhand.

Company’s brand ‘Opal’ has 91 organized retailers which includes popular brands such as Shoppers Stop, Home Town, etc. Also they have tie ups with 10 online portals and also have their own shopping portal www.opalclocks.com. They have recently started exporting both their brands, ‘Opal’ and ‘Caliber’ to the United States.

Ipo Highlights:

  1. Investments in Moulds, tools and equipment and Indigenization of the designs for expansion of the existing manufacturing facility;
  2. Enhancement of the Company’s brand through advertising and other brand building activities; and
  3. General corporate purposes.

Ipo Details:

  1. Issue Open: Mar 25, 2013
  2. Issue Closes: Mar 28, 2013
  3. Issue Type: 100% Book Built Issue IPO
  4. Issue Size: Equity Shares of Rs. 10
  5. Issue Size: Rs. 13.00 Crore
  6. Face Value: Rs. 10 Per Equity Share
  7. Issue Price: Rs. 130 – Rs. 135 Per Equity Share
  8. Market Lot: 1000 Shares
  9. Minimum Order Quantity: 1000 Shares
  10. Listing At: NSE {SMALL AND MEDIUM ENTERPRISES}
  11. CRISIL Rating: “SME 4/5”

Ipo Digest:

Bombay Stock Exchange is all out to raise its SME IPO tally (total 22 till going to push)  it appears National Stock Exchange too is on the alike style and has an IPO for its Emerge (SME){ SMALL AND MEDIUM ENTERPRISES} platform candidate offering equity on 25 Mar’2013. The company is Opal Luxury Time Products Ltd. planning mobilization of Rs. 13 crore via book building route IPO. This is the third IPO for National Stock Exchange Emerge listing for the concluding financial. Opal Luxury is a premium home décor products manufacturing and marketing company. At present, it designs and manufactures wall and table clocks and markets them less than two brands: “Opal” & “Caliber”. It offers a large & diverse range of clocks at various price points across budget, mid-level and premium styles. Since December’2012, it had 109 styles of clocks under our ‘OPAL’ brand with price raging from Rs. 1450 and brazes upto Rs. 27500 with an average price of Rs. 4275 and a median range is at Rs 3750. For the second Brand “Caliber” it had 31 styles of clocks with average range of Rs. 370. Opal has a manufacturing facility in the industrial area of Roorkee, Uttarakhand. It primarily operates in the market of premium clocks, with in-house expertise in designing complemented by quartz skill.

Trademark ‘Opal’ has a wide presence with the products marketed by a network of 9 distributors, 242 dealers and 91 organized retailers which include popular brands such as Shoppers Stop, Home Town, etc. The company has also ventured into online sales by way of popular online shopping portals and currently have tie ups with 10 online portals and also have its own shopping portal at www.opalclocks.com. Opal has recently started exporting both our brands, ‘Opal’ and ‘Caliber’, to the United States. To supplement its Rs. 15 crore investments in Moulds, tools and equipment, and Indigenization of the designs for expansion of the existing manufacturing facility and enhancement of its brand through advertising and other brand building activities along with General corporate purposes fund raising plans, it is coming out with an IPO of an equity share of Rs. 10 each with a book building process within a price band of Rs. 130-135. Issue opens for subscription on 25Mar’2013 and will close on 28Mar’2013. Minimum application is to be made for 1000 shares and in multiples thereof, thereafter. Post allotment of the shares, it will be listed on National Stock Exchange Emerge (SME) platform. The company has already raised Rs. 2 crore by way of Pre-IPO placement at a price of Rs. 110 and thus the net offer is for Rs. 13 crore. IDBI Capital Market Services Ltd. is the sole BRLM and Karvy Computershare Pvt. Ltd. is the registrar to the issue.

Company Valuation:

Going on the company’s feat front, for last three fiscal’s average EPS of Rs. 65.99 has drastically fall to Rs. 6.29 (not annualized) for first six months of the current fiscal. Owing to preferential allotment of over 20.7 lakh shares in a price range of Rs. 10-23.88 during November 2010-2011. It’s equity has gone up to Rs. 2.36 crore. Previous to this, on 02 Mr’2009 it allotted 5100 shares at a price of Rs. 1932 per share and issued bonus in the ratio of 4 shares for every ‘1′ share held on 23 Mar’2009. Net Asset Value stood at Rs. 54.31 (as on 31Mar’12) and Rs. 60.59 (as on 30Sep’2012). Present are no listed peers to compare this company’s performance. Post IPO the equity capital will rise to around Rs. 3.36 crore and if we attribute its first half net profit of Rs. 1.37 crore on a turnover of Rs. 9.57 crore, the asking price is at a P/E of about 16 which makes it a costlier bet. Further when the pre-IPO placement is done at a price of Rs. 110 on 13 Mar’13, there is no reason to hike the price band to Rs. 130-135.

Ipo Conclusion:

Since Book Running Lead Manager’s {BRML} permission performance is concerned, this is the second SMALL AND MEDIUM ENTERPRISES platform IPO from it, and the 1st One is Thejo Engg. Has failed to give any return to investors so far. On overall basis, there were 19 mandates out of which NINE IPO’s failed to give listing gains from this Book Running Lead Manager.

Bearing in mind the entry barrier and the poor performance of over 75% SMALL AND MEDIUM ENTERPRISES Initial Public Offering {IPO} post listing despite market making efforts. It is better to AVOID.

Multibagger Mineral Producer Company Stock – NMDC Limited

NMDC LimitedNMDC:

  • The NMDC Limited is a state-controlled mineral producer of the Government of India. It is fully owned by the Government of India and is under administrative control of the Ministry of Steel. It is India’s largest iron ore producer and exporter producing about 30 million tons of iron ore from 3 fully mechanized mines in Chhatisgarh and Karnataka. It also operates the only mechanized diamond mine in the country at Panna in Madhya Pradesh. It was founded on 1958 & Head Quarters is at Hyderabad, Andhra Pradesh.
  • NMDC Ltd. is presently producing about 22.8 million tonnes of iron ore from its Bailadila sector mines and 6.98 million tonnes from Donimalai sector mines.
  • Strong back up of an ISO 9001 certified R&D centre, which has been declared as the “Centre of Excellence” in the field of mineral processing by the Expert Group of UNIDO.
  • NMDC is involved in the exploration of Iron Ore, Copper, Rock Phosphate, Lime Stone, Dolomite, Gypsum, Bentonite, Magnesite, Diamond, Tin, Tungsten, Graphite, and Beach sands.
  • NMDC Ltd has gained more than 3% on successful sale of 10 per cent stake in NMDC. After this offer for sale, NMDC’s free float will double to 20 per cent.
  • The government witnessed strong participation from foreign investors and managed to mop up Rs 6,000 crore from the sale of its 10% stake which is a positive move in NMDC. Before this, pattern is like this, 90 percent by government, 8 percent by the local institutions that is LIC 6 percent and some domestic institutions. So NMDC is likely to remain in upbeat mood.
  • NMDC is the first major PSU issue to sail through without requiring the help of LIC. There is still no breakout or nothing significant to indicate a buy on charts except fundamental valuations & reasons.
  • We are bet to Grab Share near 155 with Stop loss 135 for Target 180-200 in Time Period of 3-4 Months.

NCD Public Issue – NBFC Muthoot Finance

Introduction:

Premier gold-loan NBFC Muthoot Finance has entered the debt capital market with a public issue of secured redeemable non-convertible debentures (NCDs) of face value Rs. 1,000 each, to raise Rs. 250 crore with an option to retain another Rs 250 crore, taking the total fund raising to Rs. 500 crore.

Issue Details:

The first-cum-first-serve issue has opened on 17th September and closes on 5th October 2012, with an option in company’s hands to either close the issue earlier or extend the closing. Minimum application amount is Rs 10,000, and in multiples of Rs, 1,000 thereof.

Rating: ‘AA-/Stable’ by CRISIL and ICRA indicating high degree of safety for timely servicing of financial obligations

Listing: To be listed on NSE and BSE with one NCD comprising a trading lot. NCDs in Series I to IV would be issued both in physical and demat form, while Series V NCD will be issued compulsorily in demat form.

What’s on offer: The NCD issue has 5 investment options as under:

Particulars

Series I

Series II

Series III

Series IV

Series V

Frequency Of Interest Payment

Annual

Annual

Monthly

Annual

On Redemption*

Tenure

2 Years

3 Years

5 Years

5 Years

6 Years

Coupon Rate {%pa}

11.50%

11.75%

11.75%

12.00%

NA

Effective Yield {%pa}

11.50%

11.75%

12.40%

12.00%

12.25%*

*Redemption amount of Rs. 2,000 per NCD

Company Background:

Muthoot Finance, India’s largest gold loan company in terms of loan portfolio and branch network, with gold loan portfolio of Rs. 23,336 crore as of 30th June 2012, comprising more than 60 lakh gold loan accounts served through a network of 3,780 branches. For FY12, company earned revenue of Rs. 4,537 crore and net profit of Rs. 892 crore. Company’s net worth stands at Rs. 3,172 crore as of 30th June 2012, with CAR of 19.42%. For Q1FY13, its revenue rose to Rs. 1,287 crore and net profit to Rs. 246 crore. Thus, the company enjoys sound financial position along with a healthy balance sheet. Funds raised via the NCD issue will be used in regular financing activities, investments and to repay existing liabilities.

Rate of Return:

Over 12% interest rate on 5 year NCDs with annual interest payment (Series III and IV) seems attractive for retail investment in fixed income securities, given the longer tenure of the instrument, ensuring that capital is earning higher rate. Also, Series V is an equally good option, due to doubling of investment in 6 years time. Neither any bank nor any company (with credible rating) is offering interest rates in double digit on fixed deposits of 5 years and above.

Previous NCD Issue:

Company had issued NCDs three times previously (Sep 2011, Jan 20112, Apr 2012). The 5 year NCDs from these previous issues are currently trading at yields of 12.12% to 13.41%, with average of 12.65%. However, these listed bonds have very low liquidity.

Conclusion:

Tax-free HUDCO bonds are currently trading at yields of about 7.6% on BSE. At 12% pa, Muthoot’s NCDs lead to effective post-tax return of 8.29%, assuming highest tax bracket of 30.90%. Hence, ignoring the time frame, these NCDs fare favourably against the listed tax-free bonds.

Recommendation:

The current NCD issue is attractive for retail investors as it offers high ‘fixed returns’ for a long-term duration of 5 and 6 years. It fares better than bank FD, company fixed deposits and listed tax free bonds with respect to rate of return. Those looking for diversified investment options can go for the issue with 5 or 6 years tenure i.e. Series III, IV or V, based on an individual’s cash flow needs.

Public Issue – Secured Redeemable Non-Convertible Debentures from SREI Infrastructure Finance

Introduction:

SREI Infrastructure Finance, 23year old listed NBFC, is entering the debt capital market with a public issue of secured redeemable non-convertible debentures (NCD) of face value Rs. 1,000 each to raise Rs. 75 crore with an option to retain another Rs 75 crore, taking the total fund raising to Rs. 150 crore.

Issue Details:

The first-cum-first serve issue opens on 20th September and closes on 25th October 2012, with an option in company’s hands to either close the issue earlier or extend the closing. Minimum application amount is Rs. 1 00,000 for series I and II while it is Rs 10,000 for series III and IV, and in multiples of Rs, 1,000 thereof across all series.

Rating: ‘AA’ by CARE and BRICKWORK indicating high degree of safety for timely servicing of financial obligations

Listing: To be listed on BSE with one NCD comprising a trading lot. NCD would be issued both in demat and physical (for individual investors) form.

What’s on offer: The 7 year NCD issue has 4 investment options as under:

Particulars

Series I

Series II

Series III

Series IV

Frequency On Interest  Payment

Monthly

Quarterly

Annual

Cumulative

Investors who can Apply

Individual/Huf

Individual/Huf

All

All

Tenure

7 Years

7 Years

7 Years

7 Years

Coupon Rate {% P.A}

Individual Investor

NA

NA

10.30%

NA

Non-Individual Investor

9.84%

9.92%

10.25%

NA

Effective Yield {% P.A}

Individual Investor

NA

NA

10.30%

10.25%

Non-Individual Investor

10.30%

10.30%

10.25%

10.41%

Put Option

After 5 Years

After 5 Years

After 5 Years Only For Individuals

After 5 Years Only For Individuals

Redemption Amount {Per NCD}
Individual Investor

Face Value + Accrued Interest

Face Value + Accrued Interest

Face Value + Accrued Interest

Rs. 2,000 {RS. 1,633} On Put

Non-Individual Investor

Rs.  1,980

Company Background:

SREI Infrastructure Finance provides financial products and services to its about 30,000 customers engaged in infrastructure development and construction. For FY12, consolidated total income stood at Rs. 2,446 crore with PAT of Rs. 123 crore. For Q1FY13, consolidated total income was Rs. 756 crore and PAT Rs. 22 crore. As of 30th June 2012, company had networth of Rs. 3,200 crore, on equity of Rs. 503 crore, leading to BVPS of Rs. 64. Its asset quality indicates gross NPAs of Rs. 110 crore and net NPAs of Rs. 99 crore, translating to net NPAs ratio of 0.78%.

Rate of Return: Not very attractive vis-à-vis offer by other companies on their secured NCDs like Religare and Muthoot, which enjoy credit rating one notch above SREI Infra.

Recommendation:

The current NCD issue is not attractive as its effective yields are low, versus other existing options, currently underway. Only positive is that NCDs have a longer tenure of 7 years as against 5-6 years by other issuers. One can give this a miss!

IPO Offer – Non-Convertible Debenture (NCD) of India Infoline Finance (IIFL)

Introduction:

The Non-Convertible Debenture (NCD) issuance of India Infoline Finance (IIFL) has managed to collect over Rs 110 crore on Wednesday, the first day of subscribing to the issue, according to sources in merchant banking circles. A host of wealth managers have given a thumbs up to the unsecured NCD issuance bearing a face value of Rs 1000 aggregating up to Rs 500 crores including green-shoe option.

IPO Issue Details:

 The Issue Comes on 5th September’2012 and done on a first-come-first-serve basis, closes on 18th September’2012, with an option in company’s hand to either close tha issue earlier or extend the closing. Minimum Application amount is Rs. 5,000 and Multiplies of Rs. 1,000 thereof.

IPO Rating:

However the issue has got a rating of AA- from both CRISIL and ICRA. Hence for investors who are looking for utmost safety as the first criteria, they should give this issue a clear miss.

IPO Listing:

To be Listed on Both Nse & Bse with one NCD comprising trading lot. NCD would be issued both in Physical and demat form, but can be traded on the Exchanges in demat form.

IPO Offer:

The 5 Year above NCD issue has 3 Investment Options as under:

Essentials Interest Payments Interest Rate {P.A} Effective Yield {P.A}
Option 1 Monthly 12.75% 13.52%
Option 2 Annually 12.75 12.75%
Option 3 Cumulative* Not Applicable 12.75%*

*Redemption amount at the end of 6 Years is 2,054.50 per NCD.

Allocation Ratio: 50% Issue reserved for Residential Individuals/HUFs-split equally between investment application upto Rs. 5 Lakhs and investment above Rs. 5 Lakhs 40% of the issue reserved institutions, while 10% balance for HNI’s.

Company Background:

The Company in Mortgage loans and capital market finance {loan against shares, margin funding etc} with mortgage loans accounted for 45% of its Rs. 6,746 crore loan book as of March 31st 2012, while gold loans accounted for 41%, Capital market finance 12% and balance 1% in Health Care.

For FY 12, Its Consolidated income from operations was Rs. 908 Crores with PAT at Rs. 105 Crore. With a Networth of Rs. 1,145 Crore as of 31st March 2012, company has highly leveraged with Rs. 5,938 Crore debt, including bebt-Equity ratio of 4.1:1, up from 1.6:1 as of 31st march 2011, when debt was Rs. 2,083 Crore. The current fund-raising, to be used for company’s financing activities, will only aggregate the debt-Equity ratio further.

Positives:

The 12.75% Interest rate seems attractive for retail investors in fixed income securities, given the longer tenure for the instrument for 6 Years, ensuring that capital earning the premium rate. No bank is offering interest rates in double digit on fixed deposit of 5 Years and above.

Concerns:

  1. Unsecured nature of Instrument
  2. Business operations involving in Risky areas of capital market fiancé.
  3. Parentage

Past NCD Issue:

Last August, The Company called as India Infoline Investment Services, has raised Rs. 750 Crores through NCD at 11.70-11.90% with 3-5 Years Tenure. In comparison of year ago the Interest rates are quite attractive, as the current NCD has unsecured, where last year secured NCD issued. These previously NCDs {Secured} are currently trading on NSE with yields of about 11.70% to 12% per annum.

Conclusion:

A head of RBI’s policy review on 17th September, may NBFC s having received SEBI nod, are likely to announce public issue of secured NCDs in the coming fortnight  ~ Religare Finvest, Muthoot Finance, Shriram City Union for Rs. 500 crores each and SREI Infrastructure Finance for Rs. 150 Crores .

 NCDs of other companies which are currently listed such as Shriram Transport Finance, provide greater comfort as they came large and more respected corporate, in addition to being secured instrument. Secured 5-Year NCDs of Shriram Transport Finance, issued just a last month, are currently trading at yields 11.5% to 11.8% per annum on the NSE.

IPO Recommendation:

Option I (Monthly interest payment): The redemption date is 72 months from the deemed date of allotment and the coupon rate is 12.75% p.a. The interest payment frequency is monthly and the face value plus any interest that may have accrued is payable on redemption. The effective yield on this option is 13.52% per annum. This can be termed as the ‘Small-Cap” of debt market.

For HNIs and large investors falling in the maximum tax bracket, as also, looking at the current yields on tax free bonds. Available in the secondary market and unsecured nature in NCDs from India infoline, yields looks moderate. Considering all this, put a small amount in this and wait for other better instrument for little safer and large users.

IPO Lead Managers:

The lead managers to this offer are Axis Bank Limited, SBI Capital Markets Limited, Edelweiss Financial Services Limited, Trust Investment Advisors Private Limited and India Infoline Limited (only for marketing of the Issue), while the Co-lead managers to the Issue are RR Investors Capital Services (P) Limited and Karvy Investor Services Limited.

Guidelines for Submission of IPO Applications

                                                                                                                                                                                                                                                                                                                                   

  • Companies will have to pay commission to brokers for the submission of investors’ IPO forms even if the public offer is withdrawn, and listings will not be allowed till the time this payment is made.
  • In its guidelines for submission of IPO (Initial Public Offer) applications through a nationwide network of brokers, physically or electronically, market regulator Sebi has made provisions for payment of a commission to such brokers by the IPO-bound companies.
  • Once the broker accepts the application, he would be responsible for uploading the bid on the stock exchange platform and would be made liable for not uploading the bid even after accepting the application.
  • Sebi has asked the stock exchanges to take action against such brokers and in case of repeated offence, stringent action can be taken by the stock exchanges against those brokers.
  • As per the measures proposed by Sebi, which have been approved by its board and would be soon notified, the commission would be payable based on applications that have been considered eligible for the purpose of allotment.
  • Brokers would be adequately compensated by the issuer, so that they will be interested in directly or indirectly marketing the issue as well.
  • Based on the total commission payable as calculated by the Registrar, the company would disburse the amount to the exchange before listing and the exchange in turn would pay to the brokers through clearing corporation within two days from the receipt of money from the issuer.
  • However, the listing would be withheld by the exchanges till the time issuer pays brokers’ commission to the exchange.
  • Also, the companies would be liable to pay the brokers for their activity even if they withdraw the public issue during the issue period.
  • The decision to increase the reach of IPOs through nation-wide broker network of stock exchanges in electronic form is a major policy initiative undertaken by Sebi for its primary market reforms.
  • Currently, public offers are largely distributed through a syndicate network comprising various brokers and sub-brokers with payments done through either cheques or ASBA mechanism (use of banking channels).
  • The new facility will be extended to 1,038 locations where at least one of the clearing banks has a branch. Investors can approach any of the brokers in these locations to submit their application forms.
  • The stock exchanges would provide for download of application forms on their websites, and also facilitate investors to view the status online.

Upcoming IPO – Comfort Commotrade Limited (CCL)

Incorporated in 2007, Comfort Commotrade Limited (CCL) is currently engaged in the business of commodity broking. They offers trading in many commodities such as bullion (gold, silver), energy (crude oil, natural gas), metals, food grains (rice, maize), spices, oil and oil seeds and others. They are the member of MCX and NCDEX.

Comfort Group is headquartered in Mumbai. The group is also engaged in the business of providing loans through its group company Comfort Intech Limited. The Company has a diversified client base that includes HNIs, retail customers, mutual fund houses, financial institutions, corporate clients and others.

Company Promoters:

The promoters of the company are:

  1. Mr. Anil Agrawal
  2.  Mrs. Annu Agrawal

Objects of the Issue:

The objects of this Issue are to raise funds to:

1. Expand their business operations;

2. Enhancement of margin money maintained with the exchanges;

3. General corporate purpose;

4. Issue expenses.

Issue Details:

  • Issue Open: Sep 05, 2012 – Sep 10, 2012
  • Issue Type: Fixed Price Issue IPO
  • Issue Size: 6,000,000 Equity Shares of Rs. 10
  • Issue Size: Rs. 6.00 Crore
  • Face Value: Rs. 10 per Equity Share
  • Issue Price: Rs. 10 per Equity Share
  • Market Lot: 10000 Shares
  • Minimum Order Quantity: 10000 Shares
  • Listing At: BSE/NSE