Kolkata based, GCM Securities Ltd is coming up for public issue for Rs 12.18 Crores at a price of Rs 20. Should we subscribe to GCM Securities IPO?
About GCM Securities Ltd IPO
GCM securities Ltd is registered in 1995 and currently into stock broking activities which include equity broking, investing and trading activities. GCM securities has broking services in equities and futures & options segment. Currently it is servicing corporate clients and high net worth individuals (HNI’s). GCM is planning to expand its foot print by opening 25 branches across Kolkata, Mumbai, Delhi, Chennai and Bikaner.
- IPO opens: 18-Mar-2013
- IPO closes: 20-Mar-2013
- Issue price: Rs 20 per share
- Face value: Rs 10
- Minimum bid: 6,000 shares and in multiples of 6,000 shares thereon.
- Minimum investment: Rs 120,000
- Leader managers: Inventure Merchant banking services Private Limited
- Registrar: Purva sharegistry (India) Private Ltd
- Listing: BSE SME
- Prospectus: http://www.bseindia.com//downloads/ipo/2013218173351GCM%20Securities%20Limited%20-%20Draft%20Prospectus.pdf
Purpose of the IPO: The funds would be used for the following purposes.
- Expansion and Establishments of Branch Offices
- Acquiring membership of CDSL
- Setting up Merchant Banking Division
- Investment in Group Company, GCM Commodity & Derivatives Private Limited
- Brand Building exercise
- Strengthen the Management Team
- Other Corporate Purposes
Company revenue from core business was Rs 69 lakhs in financial year ending Mar-2008 vs Rs 35.52 lakhs in financial year ending Mar-2012. Its other income in FY 2011-12 was Rs 37 lakhs which makes total income Rs 72.77 lakhs, means 50% of its revenue in last financial year has come from non-core business.
For the 6 months ended Sep-2012, the revenues was Rs 3.93 Crores. The maximum revenues in the last 5 financial years was Rs 76 lakhs, however the revenues in current year 6 months has jumped to Rs 3.93 Crores.
Coming to profits, out of last 5 financial years, it was under loss for 2 financial years and marginal profit in one financial year. For the 6 months ended Sep-2012, it made a profit of Rs 2.73 Crores.
The earnings per share (EPS) in the last 3 fiscal years were Rs 0.33. The P/E ratio based on weighted average EPS is at Rs 60. The industry standard is at Rs 15 (computations are there in prospectus). Considering this, the issue price is overpriced.
Recommendation / Investment strategy: The Company has not been growing in terms of revenues or profits. The revenues and profits have jumped only for the 6 months period ending Sep-2012. We need to check whether company is going to sustain its performance going forward. Owing to inconsistent financial performance and high stock price, investors may stay away from such IPO.
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GCM Securities Ltd IPO