Should you invest in RCI Industries and Technologies IPO?

RCI Industries and Technologies IPOShould you invest in RCI Industries and Technologies IPO?

Delhi based RCI Industries and Technologies (RCI Industries Ltd) is coming up with an IPO on 30-Dec-13. This IPO would get listed on the BSE SME Platform. This issue consists of 28.80 Lakhs shares for Rs 11.52 Crores. In this article, I would provide analysis about RCI Industries IPO and whether it is good for investment or not.

About RCI Industries and Technologies

RCI Industries & Technologies is engaged in export & import of Copper Wires used in various electrical and industrial applications.

Issue details of RCI Industries and Technologies IPO

  • IPO opens: 30-December-2013
  • IPO closes: 6-Jan-2014
  • Face value: Rs 10
  • Issue price: Rs 40
  • Minimum bid: 3,000 shares for retail investors and in multiples of 3,000 shares thereof
  • Minimum investment: Rs 120,000
  • Lead managers: Sarthi Capital Advisors Ltd
  • Listing: BSE SME
  • Download RCI Industries IPO Prospectus

The purpose of the IPO: The funds would be used for the following purposes.

  • Working capital requirement
  • General Corporate Purpose

Company Financials

  • The company has posted revenue of Rs 185.76 Crores for the year ended Mar-2009 and 276.99 Crores for the year ended Mar-2013.
  • The company has posted a profit of Rs 48 Lakhs for the year ended Mar-2009 and Rs 104.02 Lakhs for the year ended Mar-2013.

Reasons to invest in RCI Industries and Technologies Ltd IPO

  • Good growth in the revenues in the last 5 years.

Reasons not to invest in RCI Industries and Technologies Ltd IPO

  • Profits are very low.
  • The IPO’s listed on the BSE SME platform are trading on low volume and  liquidity is an issue.
  • Minimum investment required is Rs 1.20 lakhs.

Recommendation / Investment strategy:

Average EPS for the last 3 years is Rs 1.74. At issue price of Rs 40, this translates to a P/E ratio of 30x.

There is no peer to compare with similar business and size. With such very low profits, the issue price of Rs 40 for RCI Industries and Technologies IPO looks expensive for such SME IPO. Investors should avoid such IPO's.

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Suresh
RCI Industries and Technologies IPO

One comment

  • Bhanu Prasad

    A very good article which is analytic and educative for young enterpreuners like me.

     

    Thanks for wrinting the blog.

     

     

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