Anubhav Infrastructure IPO-SME-Should you subscribe
Anubhav Infrastructure SME IPO
Anubhav Infrastructure Limited IPO would hit the market on 26th November, 2014. This company has earned a Rs 141 Crores revenues in FY 2013-14 which indicates 24% growth compared to previous financial year. This company is engaged in providing land development and construction services. Should you subscribe to the Anubhav Infrastructure IPO? What are the positive and negative points an investor should consider if they want to invest in Anubhav Infrastructure Limited IPO?
About Anubhav Infrastructure Limited
Anubhav Infrastructure Limited is engaged in providing land development, construction services and other related services for civil and structural construction and infrastructure sector projects. These services are provided by them through third party contractors to whom they subcontract construction and other execution work related to the projects. Promoters have acquired the company in 2009 and the company claims that post that it has witnessed a growth in the number of projects being undertaken and also in the revenues of the company.
Issue details of Anubhav Infrastructure IPO
- IPO opens: 26-Nov-2014
- IPO closes: 28-Nov-2014
- Face Value: Rs 10 per share
- Issue price: Rs 15 per share
- Minimum investment: Rs 100,000
- No of shares open to public: 60 Lakh shares
- Issue size: Rs 9 Crores
- Lead Managers: First Overseas Capital Limited
- Listing: BSE SME platform
Download Anubhav Infrastructure IPO Prospectus from SEBI website here
Purpose of the IPO: Objects of the issue are:
- Listing benefits
- Carry out selling of 60L shares by promoters (not by the company)
- Issue Expenses.
- Company generated revenue of Rs 643 Lakhs for the year ended Mar-10 and Rs 14,162 Lakhs for the year ended Mar-14.
- Company posted a profit of Rs 4.1 Lakhs for the year ended Mar-10 and a profit of Rs 62.53 Lakhs for the year ended Mar-2014.
- EPS for FY2014 is Rs 0.29
- Average EPS for the past 3 years is Rs 0.26
Reasons to invest Anubhav Infrastructure IPO
- Good revenue growth in last 5 years.
Reasons not to invest in a Anubhav Infrastructure IPO
- Company earns thin profits of 0.4% to 0.6% in last 5 years. Though revenue grown from Rs 6.42 Crores in FY 2010 to Rs 141.62 Crores in FY 2014, it earns just Rs 62.53 Lakhs of profits in FY 2014.
- Company involved in IT matter and financial implication of approx Rs 50 Lakhs is pending. Any adverse decision against the company could lead to liability to this extent.
- It has negative cash flows for the past 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.
- Shares are offered for sale by promoter company Parameshwar Mechantile Private Limited and the company will not receive any proceeds.
- Increase in price of raw materials may advertise affect the profits of the company.
- Promoter company has incurred loss in the last financial year. This indicates poor promoter performance.
- SME IPO’s are trading on low volume. Liquidity of such shares could be an issue. Stock brokers can easily manipulate the price of the stock.
Recommendation / Investment strategy
- On an issue price of Rs 15 per share, based on FY 2014 EPS of Rs 0.29, P/E Ratio works out to be 51.72 times. Last 3 years EPS is Rs 0.26 and P/E ratio works out to be 57.69. Its competitors highest P/E Ratio is 132 (Shristini Infra) and the lower P/E ratio is 1.9 (Zandu Realty). Considering 52 to 57 P/E ratio of Anubhav Infrastructure IPO for the issue price of Rs 15 per share (where it is making thin margins) seems to be high.
- Though company revenues grew in the last 5 years, thin margins makes this IPO unattractive. We should wait and watch the performance for another few quarters and if this company profits are grown, one can look at investing in such company. As of now, investors should avoid investing in such IPO.
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Anubhav Infrastructure IPO-SME