Stellar Capital IPO – Avoid
Delhi based Stellar Capital Services Ltd (Stellar Capital) SME IPO has hit the market yesterday. This IPO would get listed on the BSE SME Platform. In this article, I would analyze about Stellar Capital IPO and provide my comments whether it is good for investment or not.
About Stellar Capital IPO
Stellar Capital Services is an NBFC registered with RBI to carry on NBFC Activities. The company is a non deposit taking non-systemically important Non Banking Finance Company (NBFC-ND-NSI) engaged primarily in the business of advancing loans and investing/trading in securities.
Issue details of Stellar Capital IPO
- IPO opens: 15-Oct-2013
- IPO closes: 18-Oct-2013
- Face value: Rs 10
- Issue price: Rs 20
- Minimum bid: 6,000 shares for retail investors and in multiples of 6,000 shares thereof
- Minimum investment: Rs 120,000
- Lead managers: Aryaman Financial Services Ltd
- Listing: BSE SME
- Download Prospectus of Stellar Capital IPO
The purpose of the IPO: The funds would be used for the following purposes.
- To acquire offices for rent / lease in Kolkata and Jaipur
- To augment capital base and provide funding requirements for increasing our operational scale with respect to NBFC activities
- To meet Issue related Expenses
- The company has posted revenue of Rs 1.83 Lakhs for the year ended Mar-2009 and 389.29 Lakhs for the year ended Mar-2013.
- The company has posted a profit of Rs 10.06 Lakhs for the year ended Mar-2013.
Reasons to invest Stellar Capital IPO
- Good growth in the revenues in the last 3 years.
Reasons not to invest in Stellar Capital IPO
- The company runs on thin margins. Its profits are just Rs 10 Lakhs on revenues of Rs 3.89 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 0.05. At issue price of Rs 20, this translates to a P/E ratio of 500x. It peers like Bajaj Finserv are trading at a P/E ratio of 130x (which is high) and HB Stocks at 9.7x (which is low). Hence the issue price of Stellar Capital IPO looks very expensive.
- Though we are seeing a good revenue growth in the last 3 years, the profits are thin. These can be easily wiped out with small change in market conditions. The issue price is also expensive.
- Considering above facts, my suggestion to investors is to stay away from such IPO.
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Stellar Capital IPO