Ultracab India IPO (SME) – Can we invest?

Ultracab India IPOUltracab India IPO (SME) – Can we invest

There are flood of regular and SME IPO’s coming in Sep-2014. Ultracab India Limited (SME) is coming up with an IPO this week. Ultracab India is leading manufacturers and  exporters of electric wires and cables in India. Revenues and profits show good improvement in the last few years. Can we bet on Ultracab India IPO? What risk factors investors should consider if they want to invest in Ultracab India Limited (SME) IPO?

About Ultracab India Limited

Ultracab Limited is established in 2007 and is engaged in the manufacture and export of wires and cables in India. This company has been working in this domain for more than 6 years. They indicate that they are using advanced technology and machineries for manufacturing quality products. They started the business with PVC cables and wires in India which are now supplied across different networks worldwide. They produce durable and reliable cables and wires, and its products have earned reputation in the market. Apart from India, their quality products are sold in countries like UK, UAE, Africa, Singapore, Uganda etc. Their manufacturing facility is situated in Shapar (Rajkot, Gujarat) India. Their facility involves modern technology, tools, high-tech machines which spin out the quality standard of cables.

Also Read: Do you have the art of identifying blue chip stocks in India?

Issue details of Ultracab India IPO

  • IPO opens: 15-Sep-2014
  • IPO closes: 23-Sep-2014
  • Face Value: Rs 10 per share
  • Price Band: Rs 36 per  share
  • Minimum shares to be applied: 3,000 shares and in multiples of 3,000
  • Minimum investment: Rs 108,000
  • Lead Managers: Pantomath Capital Advisors Private Limited
  • Listing: BSE  SME
  • Download Ultracab India IPO Prospectus from SEBI website here

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

  • Working capital requirements
  • Issue expenses
  • General corporate purpose

Company Financials

  • The company generated revenue of Rs 1066 Lakhs for the year ended Mar-10 and Rs 3,181 Lakhs for the year ended Mar-14.
  • Company posted a profit of Rs 14.66 Lakhs for the year ended Mar-10 and a Profit of Rs 82.78 Lakhs for the year ended Mar-2014.

Ultracab India IPO-Financials

Reasons to invest Ultracab India IPO

  • Good annualized growth of 32% (average) in last 5 years.
  • Profit margins have increased from 1.4% of revenue (FY 10) to 2.6% of revenues (FY14)

Reasons not to invest in an Ultracab India IPO

  • The capacity of the manufacturing facility is not fully utilized. Since such time, full fixed cost need to be absorbed.
  • It has negative cash flows in last 5 years. This indicates that it need to borrow loans for high rate of interest and has difficulty in managing working capital requirements. This would affect the profits of the company.
  • Company is involved in legal proceedings. Any adverse decision against the company would affect the business.
  • Company requires significant working capital for a continued growth. Inability to meet the working capital requirement would slow down the business growth.
  • Its Group Company, Fusion Pumps Private Limited has incurred losses for financial year 2012-13.
  • Company has unsecured loans which are payable on demand.

Also Read: How Beta value of the stock would help you in identifyng quality stocks?

Recommendation / Investment strategy

  • Based on EPS of FY2014 of Rs 1.6, the PE Ratio would work out to be 22. Based on average EPS of last 3 years of Rs 1.08, the PE Ratio would work out to be 33.20. Means for the issue price of Rs 36, the PE Ratio asked is in between 22 and 33.20. Its industry average is at 24 and Highest is 32.5 (V-Guard Industries Limited) and the lowest is 15.34 (Cord Cables Industries Limited), hence PE ratio of 22-33 being asked for the issue price of Rs 36 is high.
  • Company revenues are growing consistently. However, profits are still thin. Issue price also looks high.
  • We need to observe for a couple of more quarters and in case profits are showing improvement, investors can subscribe for these shares. As of now, investors can stay away from an Ultracab India Limited IPO. Personally, I would not be investing in this IPO.

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Ultracab India IPO


  • shekhar chopra

    sir,can u write on share markets to guide us,like which share is better to invest and also that on what behalf we have to chose the best share ..actuly i read your blogs on investment and i am new in investment and after reading your blogs i came to know what is mutul funds and on that behalf i started to invest in mutul funds .one of mutul fund i have choosed which is you suggested to me .same like can you guide us that in share markets which stratgy we have to follow and on what we have to check before buy to any share.. bcz i have seen some times on cnbc awaaz some of their guest suggest the share and they tell all about that company for why we that share is best to buy ,same like that can you guide on that techniqly things which we should check to buy a share..plz..

  • Amit

    Hi Suresh,

    Please help me understand this. I am aware that one can save income tax on long term investment. Above you have mentioned that you will wait another year on Wonderela to gain long term tax benefit.

    Please tell me if this is applicable on all kind of investment i.e. stock, mutual funds, property, land?
    How long (minimum time period) you have to hold such investment to gain or save tax benefit?
    Is it possible if you hold for very long time and you dont have to pay NO tax?

    Please advise at your convenience. Thanks so much.

    • Amit, Stocks – 1+ years is long term. However mutual funds, equity funds, > 1 year is long term and no tax. However < 1 year or debt funds which are < 3 years are treated as short term and short term capital gains are calculated. Similarly for land there is method for computation

  • Amit

    Hi Suresh,

    Thanks so much for your advise on Ultracab India IPO. My mind is 100% clear that I am not going to invest in this IPO. I am waiting for tomorrow to subscribe Shemaroo IPO. You have made my life much easier in terms of investing.

    I do visit your website once in a day to see if anything new you have brought for us.

    I was always looking for different kind of investment plans. I knew there are many. Finally, I got answers to all my investment related questions. Tell you the truth, Now, I don’t go anywhere and look for any advise from anyone or any website, if I have any investment related questions or make any investment. I just go through your website. I have become your fan now because i always find your advise correct (based on knowledge I have).

    Thanks so much for your efforts. God bless you.

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