Gujarat based Amrapali Capital & Financial Services (ACFS) SME IPO has hit the market yesterday. This IPO would get listed on the BSE SME Platform. Looking at revenue numbers, it would indicate huge growth, but shareholders would get nothing. This company revenues are at Rs 19 Crores, but its profits are not even Rs 19 Lakhs. In this article, I would analyze Amrapali Capital and Financial Services IPO and whether it would be good to invest or not?
About Amrapali Capital and Financial Services IPO
The company is engaged in the business of trading of shares, stocks, forex, arbitrage business including Brokerage business, which comprises of equity brokerage (Cash and Derivatives segment), currency brokerage, distribution of financial products, depository and clearing services.
Issue details of Amrapali Capital and Financial Services IPO
- IPO opens: 15-Oct-2013
- IPO closes: 18-Oct-2013
- Face value: Rs 10
- Issue price: Rs 100
- Minimum bid: 1,200 shares for retail investors and in multiples of 1,200 shares thereof
- Minimum investment: Rs 120,000
- Lead managers: Corporate Strategy Allianz Ltd
- Listing: BSE SME
- Download Prospectus of Amrapali Capital IPO IPO
The purpose of the IPO: The funds would be used for the following purposes.
- Enhancement of margin money maintained with the Exchanges
- General corporate purpose
- To meet the issue expenses
- The company has posted revenue of Rs 1969.05 Lakhs for the year ended Mar-2010 and 1957.05 Lakhs for the year ended Mar-2013.
- The company has posted profits of Rs 14.94 Lakhs for the year ended Mar-2010 and 17.06 Lakhs for the year ended Mar-2013.
Reasons to invest Amrapali Capital IPO
Reasons not to invest in Amrapali Capital and Financial Services IPO
- Revenues dipped for more than 57% in the year ending Mar-2011. Its revenue for the year ended Mar-2013 is still lower than what it earned 4 years back.
- The company runs on thin margins. Its profits are just Rs 17 Lakhs on revenues of Rs 19.57 Crores.
- The IPO’s listed on the BSE SME platform are trading on low volume and liquidity is an issue.
- The investment required is Rs 1.20 lakhs.
Recommendation / Investment strategy:
- Average EPS for the last 3 years is Rs 0.19 and for the year ended Mar-2013 it is Rs 0.32. At issue price of Rs 100, this translates to a P/E ratio of 416x. It peers like DB Stock Brokers Ltd are trading at a P/E ratio of 51x. Hence the issue price is very expense for this IPO.
- Though we are seeing the revenues are back on track in last 3 years, the profits are thin. These can be easily wiped out with small change in market conditions.
- Considering above facts, my suggestion to investors is to stay away from such IPO.
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Amrapali Capital and Financial Services IPO