Kavita Fabrics Ltd IPO – Review

Kavita Fabrics Ltd IPO – Review

Gujarath based Kavita Fabrics Ltd has come out for IPO for public issue for Rs 5.1 crores of shares @ at a price of Rs 40. We would discuss what Kavita Fabrics does, details about current publish issue, its financials and finally a conclusion about whether we need to invest in Kavita Fabrics IPO or not ?

About Kavita Fabrics Ltd

Gujarat based Kavita Fabrics Ltd is engaged in the manufacturing of synthetic fabrics from man-made yarns. Currently, company owns 36 jacquard power looms to undertake the weaving of the synthetic fabrics. It manufactures synthetic fabrics in the form of semi-finished sarees and dress materials.

The promoters are Mr.Harish Chandak, Mr.Shailesh Chandak, Sarika Chandak and Sudha Chandak.

Current issue of shares to public

Issue price: Rs 40 per share

Minimum bid: 3,000 shares and multiples there-of

Minimum investment: Rs 120,000

IPO opens: 20-Feb-2013

IPO closes: 22-Feb-2013

Book Running Leader managers(BRLM): Intensive Fiscal Services Private Limited

Listing: BSE SME

Purpose of the IPO: The funds would be used for the following purposes.

1. To meet long-term working capital requirement 

2. To meet General Corporate expenses

3. To meet Public Issue Expenses

How the company is doing in terms of its financials ?

Kavita Fabrics Ltd IPO – Quick Review

The company has been growing in terms of revenues. YoT Growth indicated above is in terms of revenues. The margins are at 2.15% for year ending Mar-2012 and for 5 months ending Aug-12 the margins are 4.26%.

Recommendation:  Kavita Fabrics is a IPO under SME (Small-Medium Exchange) category. Thought the revenues have been in uptrend in the last 4 years the margins are less than 2%. Only in the first 5 months of this financial year the margins are showing at 4.26%. Even a small stiff competition can ruin the margins and company can move to losses. Regarding BRLM’s performance is concerned, there were 3 IPO’s listed and one IPO has given negative returns on listing day. Considering all these factors, retail investors can avoid investing in this IPO.

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Kavita Fabrics Ltd IPO

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