Tentiwal Wire Products IPO – Can we invest ?

Tentiwal Wire Products IPOTentiwal Wire Products IPO – Can we invest ?

Uttar Pradesh (UP) based Tentiwal Wire Products SME IPO has hit the market yesterday. This IPO would get listed on the BSE SME Platform. In this article, I would analyze about the Tentiwal Wire Products IPO and whether it is good for investment or not.

About Tentiwal Wire Products

Tentiwal Wire Products is a manufacturer and supplier of winding wires and aluminum extrusions. Tentiwal Wire products is issuing 16.30L shares @ Rs 13 per share for subscription of Rs 2.12 Crores.

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Issue details of Tentiwal Wire Products  IPO

  • IPO opens: 11-Dec-2013
  • IPO closes: 16-Dec-2013
  • Face value: Rs 10 per share
  • Issue price: Rs 13 per share
  • Minimum bid: 10,000 shares for retail investors and in multiples of 10,000 shares thereof
  • Minimum investment: Rs 130,000
  • Lead managers: Hem Securities Limited
  • Listing: BSE SME

Download Prospectus of Tentiwal Wire Products IPO

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

  • To reduce overall indebtedness of the company by repayment of the outstanding loan from Aditya Birla Finance.
  • General corporate purpose

Company Financials

  • The company has posted revenue of Rs 776.51 Lakhs for the year ended Mar-2009 and 4,107.20 Lakhs for the year ended Mar-2013.
  • The company has posted a profit of Rs 8.37 Lakhs for the year ended Mar-09 Vs Rs 55.99 Lakhs for the year ended Mar-2013.

Tentiwal Wire Products IPO-Financials

Reasons to invest Tentiwal Wire Products IPO

  • Good growth in the revenues in the last 5 years.

Reasons not to invest in Tentiwal Wire Products  IPO

  • The company runs on thin margins. Its profits are just Rs 56 Lakhs on revenues of Rs 4,107 Lakhs which is 1.36%.
  • The IPO’s listed on the BSE SME platform are trading on low volume and  liquidity is an issue.
  • Minimum investment required is Rs 1.30 lakhs.

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Recommendation / Investment strategy:

  • Average EPS for the last 3 years is Rs 1.51. At issue price of Rs 13, this translates to a P/E ratio of 8.59. Considering FY-12-13 EPS the P/E ratio translates to 7.51. It peers like Precision Wires India Ltd are trading at a P/E ratio of 3.79 (Highest) and Kei Industries Ltd  at P/E ratio of 1.96(Lowest). Hence the issue price of Tentiwal Wire Products IPO looks very expense for such SME IPO.
  • Though we are seeing a good revenue growth in the last 5 years, the profits are thin. These can be easily wiped out with small change in market conditions and under competitive world. The issue price is also expensive.
  • Considering above facts, my suggestion to investors is to stay away from such IPO.

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Tentiwal Wire Products  IPO

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