Cawasji Behramji Catering Services IPO – Should you invest?

Cawasji Behramji Catering Services IPOCawasji Behramji Catering Services IPO – Should you invest?

Mumbai based, Cawasji Behramji Catering Services IPO will open for subscription on 29th September, 2015. Cawasji Behramji is engaged into business of providing food catering and housekeeping services. Its revenues have grown by 1.7 times in last 5 years. It earned 1.3% profits for last financial year. I stopped SME IPO reviews sometime back as investors are not getting benefitted much with such IPO investments. Since this is the unique company which into catering services and has come to IPO, it is attracting several investors. What are the positive factors of Cawasji Behramji Catering Services IPO? What are hidden factors of Cawasji Behramji Catering Services Ltd IPO? Should you invest in such IPO?

About Cawasji Behramji Catering Services Ltd

Its present business composition can be categorised into the following divisions:

1. Offshore catering & housekeeping services: They provide food catering & housekeeping services to various Indian and International shipping and oil exploration companies. They operate and manage staff cafeterias, on a contract basis, at the premises of its corporate clients on different locations. Company provides services on locations such as Offshore Barges, Rigs, Diving Vessel, Supply Vessels and Remote Production Platforms.

2. Onshore catering services: They provide food catering services to its corporate clients, banquets, parties & events and gymkhanas. Under this division, they operate and manage services, on a contract basis, at the premises of its clients.

3. Fine Dining Restaurant: They operate a dedicated restaurant under the brand of “me so happi” located in Khar (W), Mumbai. This restaurant under the aforesaid brand name commenced its operations in September, 2014. Its eatery restaurant offers a fun-dining experience with its service focusing on providing consumers with quality social engagement, fun and plays along with quality food and service in modern ambience.

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Issue details of Cawasji Behramji Catering Services IPO

  • IPO opens: 29-Sep-2015
  • IPO closes: 5-Oct-2015
  • Face Value: Rs 10 per share
  • Issue price: Rs 14 per share
  • Minimum Shares: 10,000 shares
  • Minimum amount: Rs 140,000
  • Issue size: Rs 1.86 Crores
  • Lead Managers: Hem Securities Ltd
  • Listing: BSE SME
  • Download Cawasji Behramji Catering Services Limited IPO Prospectus from this SEBI link here

Purpose of the IPO

  • The Objects of the Offer are to achieve the benefits of listing the Equity Shares on the Stock Exchanges and to carry out the sale of 13.3 Lakh Equity shares by the Selling Shareholder (by one of the Promoter).
  • Company will not receive any Proceeds from the Offer.

Company Financials (reinstated)

  • Company generated revenue of Rs 37.49 Crores for the year ended Mar-11 and Rs 64.16 Crores for the year ended Mar-15. 
  • Company posted a Profit of Rs 1.11 Crores for the year ended Mar-11 and a Profit of Rs 0.82 Crores for the year ended Mar-2015.
  • Its EPS for FY 2015 is Rs 1.64 and last 3 years average EPS of Rs 3.18.

Cawasji Behramji Catering Services IPO-Financials

Reasons to invest Cawasji Behramji Catering Services IPO

  • Good revenue growth in last 5 years. It revenues increased by 1.7 times in last 5 years. However in last 1 year, its revenues have dropped by 12%.
  • No listed peers in such business model in India.

Reasons not to invest in Cawasji Behramji Catering Services IPO

  • Company will not receive any proceeds from the Offer. This IPO is only for listing benefits and offer for sale from one of the promoter.
  • There are certain outstanding legal proceedings involving Company which are pending at different stages before the Judicial / Statutory authorities. Any rulings by such authorities against Company may have an adverse material impact on its operations.
  • Company require several statutory and regulatory permits, licenses and approvals to operate, some of which Company has either received, applied for or is in the process of application. Many of these approvals are granted for fixed periods of time and need renewal from time to time. Company has made delays in paying outstanding statutory dues of service tax.
  • Company Registered Office and other premises from where they operate are not owned by them.
  • Company operates its centralized warehouse which is subject to certain legal disputes.
  • Company has inadvertently failed to ensure compliance with certain statutory provisions under the Companies Act. Such non-compliances/lapses may attract penalties from relevant regulatory authorities.
  • Any penalty or action taken by any regulatory authorities in future for non-compliance with provisions of Companies Acts could impact the financial position of the Company to that extent.
  • Promoter and Chairman & Managing Director, Mr. Alfred Micheal Arambhan was holding multiple DIN in the past.
  • They have limited operating history and investors may not be able to analyse its past performances or future prospects.
  • Company has allotted equity shares in the last one year, which are a price below the Offer price.
  • The Indian food services industry has a history of being fragmented and unorganized, lacking sufficient reliable industry data. As a result, third party statistical and financial data in the Prospectus may be incomplete or unreliable.
  • Other risk factors (Internal and external) can be viewed in prospectus Page no. 12 onwards.

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Recommendation / Investment strategy

  • At an issue price of Rs 14 and on last financial year FY14-15 EPS of Rs 1.64, P/E ratio works out to be 8.54 times. There is no listed peers in similar business in India, hence we cannot say whether issue price is high or under priced.
  • Though, Cawasji Behramji Catering Services revenues have been growing consistently in last 5 years, there is dip in revenue by 12% in last financial year.  It generated thin margins of 1.3% in last financial year and last 3 years margins are in declining mode. Though there are no listed companies in India doing similar business, I would not get excited with just with business model, but merely the performance of the company. I would advise investors to stay away from such IPO’s where performance is in declining mode and which generates thin margins.

Disclaimer: I do not have an interest in investing in this IPO. The idea of giving positive and negative factors to investors in this article is to create awareness and education about this IPO. One should NOT constitute this as investment advice to buy or not to buy. Please consult your investment advisor before you invest in such high risk investment options.

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Cawasji Behramji Catering Services IPO


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