OneSource Techmedia IPO – Avoid

Onesource Techmedia IPO-May-2013OneSource Techmedia IPO – Avoid

Chennai based OneSource Techmedia Ltd (OTL) has come out with its IPO of 20 lakhs shares @ Rs 10 each with a premium of Rs 4. Should you subscribe to OneSource Techmedia IPO?

About OneSource Techmedia IPO

Incorporated in 2008, OneSource Techmedia Ltd is involved in the business of distribution and trading of media contents in the form of video and audio cassettes and compact discs etc. They have entered into a Royalty agreement with the companies like JMD Telefilm Industries Ltd, Mumbai, Pentamedia Graphics Ltd, Chennai and Saraa Media Works Pvt. Ltd., Chennai.

Also read: Are you in hurry to subscribe Just Dial IPO Crisil 5/5 rated IPO? Read this before investing

Issue details:

  • IPO opens: 17-May-2013
  • IPO closes: 21-May-2013
  • Face value: Rs 10
  • Issue price: Rs 14
  • Minimum bid: 10,000 shares and in multiples of 10,000 shares thereon
  • Minimum investment: Rs 140,000
  • Lead managers: Guiness Corporate Advisors (P) Ltd
  • Listing: BSE SME
  • Prospectus:

Promoters of the company are Mr.Kishan Kumar Jhunjhunwala and SKB Finance Ltd

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

  • To finance business expansion plans.
  • Achieve benefits of listing on the BSE SME platform

Company financials

Company revenues are not consistent. The revenues have grown from Rs 23.86 Lakhs in FY2008-09 to Rs 60.48 Lakhs in FY 2011-12. For the 8 months ended Nov-2012, company reported abnormal revenues of Rs 720.5 lakhs.

Coming to profits, company has posted 1.26% margins in FY 2008-09 and 5.44% in FY 2011-12. For the eight months ended Nov-12, the profits are 0.63%.

Onesource Techmedia IPO

Reasons to invest in OneSource Techmedia IPO


Reasons not to invest in OneSource Techmedia IPO

  • The financials are not consistent.
  • Company is raising Rs 2.8 Crores, but it locked in long term deposits of Rs 3.25 Crores, current IPO for raising funds not justifiable.
  • Company collected Rs 1000 per share in Mar-11 share allotment which is very high for its business. Currently the issue price is Rs 14. Do not understand the logic behind collecting such high price in 2011.
  • It has issued bonus shares in the ratio of 2: 1 during Nov-12 for 29.95 lakhs by capitalization of free reserves. If company needs funds for expansion, it should raise capital and not to issue bonus shares.

Also Read: 10 Tips before you invest in IPO

Recommendation / Investment strategy: Company is not consistent performer. The revenues are highly fluctuating. Current margins for 8 months ended Nov-12 is less than one percent. I feel there is no single reason why we should invest in such IPO. Suggest investors to avoid such IPO.

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OneSource Techmedia IPO – Avoid

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