Blueblood Ventures IPO – What are hidden factors in prospectus?

Blueblood Ventures IPO Review - Should you investBlueblood Ventures IPO – What are hidden factors in prospectus?

Delhi based, Blueblood Ventures IPO has opened for subscription on 21st January, 2016. Blueblood Ventures Ltd business activities are trading and investment activity in stocks and commodities. It revenues grown by 73 times in last 5 years. You might be tempted to invest in such IPO’s. What are the positive factors of Blueblood Ventures IPO? What are its hidden factors in Blueblood Ventures IPO? What is that one factor which company has hidden in this IPO prospectus? Why investors should be careful and read the complete prospectus and not just the summary?

About Blueblood Ventures Limited

The Company’s business activities are trading and investment activity in stocks and commodities and now plans to enter into real estate and construction. Recently, company has decided to extend its interest in the activity of investments to real estate in lieu of which the main objects of the Company were altered. The name of the Company was also suitably modified indicative of the new line of business. This sector has been an avenue of good appetite commensurate with the objective of providing housing, hospitality, recreational etc., and increase in purchasing power economy.

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Issue details of Blueblood Ventures IPO

  • IPO opens: 21-Jan-2016
  • IPO closes: 27-Jan-2016
  • Face Value: Rs 10 per share
  • Issue price: Rs 50 per share
  • Minimum Shares: 3,000 shares and multiples of 3,000 shares there-of
  • Minimum amount: Rs 150,000
  • Issue size: Rs 7.03 Crores
  • Lead Managers: Quintessense Enterprises
  • Listing: BSE SME
  • Download Blueblood Ventures IPO Prospectus from SEBI Website at this link

Purpose of the IPO:

1. Purchase of Development area

2. Repayment of unsecured loans

3. Issue Expenses

Company Financials (reinstated)

  • Company generated revenue of Rs 4.29 Lakhs for the year ended Mar-11 and Rs 312.99 Lakhs for the year ended Mar-15.  For 5 months ended Aug-15, company generated revenue of Rs 33.61 Lakhs.
  • Company posted a profit of Rs 0.08 Lakhs for the year ended Mar-11 and Rs 9.04 Lakhs for the year ended Mar-2015. For 5 months ended Aug-15, company generated profit of Rs 2.38 Lakhs.
  • Its restated EPS for FY 2015 is Rs 1.78 and last 3 years average EPS of Rs 2.59.

Blueblood Ventures IPO Financials - Should you invest

Reasons to invest Blueblood Ventures IPO

  • Revenue has increased by 73 times in last 5 years.

Reasons not to invest in Blueblood Ventures IPO

  • It generated thin margins of 2.4% to 2.9% in last 2 years. 5 months ended Aug-15 profits indicate increase in margins to 7%. Generally company show high profits when they go for IPO to attract investors.
  • They are yet to execute an agreement / MoU with GC Constructions with regard to the proposed purchase for the Objects of the Issue.
  • They are venturing into real estate for the first time. It may or may not be successful.
  • The proposed objects of the issue for which funds are being raised have not been appraised by any bank or financial institution.
  • There are Unsecured loans payable on demand Revenues from trading and securities would be inconsistent.
  • Conflict of interest with the business of promoter group companies.
  • One of the promoter group entities has incurred in past.
  • Other risk factors (Internal and external) can be viewed in prospectus Page no. 10 onwards.

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Recommendation / Investment strategy:

  • On the issue price of Rs 50, based on FY2015 EPS of Rs 1.78, its P/E Ratio works out to be 28. Similarly based on last 3 years EPS of Rs 2.59, P/E Ratio works out to be 19. However for 5 months ended Aug-15 EPS is just 0.2. P/E ratio would work out to be 263. Industry average is just 20. Means company is hiding this fact in prospectus by not disclosing it in highlights. The issue price is very high.
  • Blueblood Ventures Limited revenues have increased 73 times in last 5 years. However, it generates thin margins. Company posted higher margins for 5 months ended Aug-15 just before IPO to attract investors. It is asking for issue price of Rs 50 per share which is very high compared to industry average. Investors should be careful and avoid such IPO’s.

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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Blueblood Ventures IPO Review

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