Newever Trade Wings – SME IPO – Avoid
Kolkatha based Newever Trade Wings is coming out of public issue for 6.32 Lakh shares of issue price of Rs 10 each. Newever Trade Wings IPO would hit market on 30-Sep-13. Newever Trade Wings Company is just one year old company making low profit of Rs 3.85 Lakhs. Should you subscribe to Newever Trade Wings IPO?
About Newever Trade Wings
Newever Trade Wings Ltd is engaged in business of trading iron and steel and other commodities. It is into multi-product iron and steel trading company with a diverse product portfolio. Newever Trade Wings IPO would be listed in BSE SME platform.
Issue details of Newever Trade Wings IPO
- IPO opens: 30-Sep-2013
- IPO closes: 4-Oct-2013
- Face value: Rs 10
- Issue price: Rs 10
- Minimum bid: 10,000 shares and in multiples of 10,000 shares thereon
- Minimum investment: Rs 100,000
- Lead managers: Inventure Merchant Bank Services Private Ltd
- Listing: BSE SME
- Download Prospectus of Newever Trade Wings IPO
Purpose of the IPO: The funds would be used for the following purposes.
- Augmenting long term working capital
- Meeting public issue expenses.
- Listing gains at BSE Stock exchange.
Since the company has formed only in Apr-2012, only one year financials are available.
- Company has posted a revenue of Rs 1028.44 Lakhs for the year ended Mar-2013.
- Company has posted a profit of Rs 3.85 Lakhs for the year ended Mar-2013.
Reasons to invest Newever Trade Wings IPO
Reasons not to invest in Newever Trade Wings IPO
- This company is just 1 year old. The performance of 1 year cannot be benchmark. We need to wait and observe the performance for at least 4 to 5 years.
- Low profit of Rs 3.85 Lakhs which is just 0.37% margin on its revenue. These thin margins can wiped out easily with small increase in raw material or purchasing cost.
- The SME IPO’s listed are trading with very low volume and the liquidity has been a problem.
- The minimum investment required is Rs 1.00 lakhs.
Recommendation / Investment strategy:
- Company runs on very thin margins.
- NAV of this company as on 31-Mar-2013 is Rs 9.95. Post this issue, the NAV would be Rs 9.96.
- The EPS for the year ended Mar-2013 is Rs 0.17. This translates to 58.82 P/E ratio (Share price to earnings ratio = Rs 10 / Rs 0.17). Its competitors like Aseem Global, Rain commodities are trading at P/E ratio of 10.4 and 21.8 as against Newer Trading P/E ratio of 58.82. Hence the issue price is high compared to its competitors.
- Considering this as new born baby and very thin margins, my suggestion to investors is to stay away from such IPO.
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Newever Trade Wings IPO