Shri Krishna Prasadam IPO Analysis
New Delhi based Shri Krishna Prasadam SME IPO has hit the market this week. Company issues the shares at par of Rs 10 per share without any premium. Company makes good revenue growth of 70% and 50% in previous two financial years. All looks pretty good. What should be your take on this IPO. Can you bet on the Shri Krishna Prasadam IPO? Does this IPO of Shri Krishna Prasadam gives at least listing gains?
About Shri Krishna Prasadam
Initially Shri Krishna Prasadam was engaged in the business of manufacturing, exporting and supplying of gemstones, stone jewelry, rudraksha beads, shivlings, shri yantras, sphatik ganesh, rudraksha pendant, rudraksha mala, etc. in India. However, in view of the market scenario and increase in the custom duty payable on Gold, the board of directors decided to alter the object clause of the company in order to allow it to operate in areas such as real estate, consultancy services and agricultural activities.
Issue details of Shri Krishna Prasadam IPO
- IPO opens: 11-Mar-2014
- IPO closes: 14-Mar-2014
- Face value: Rs 10 per share
- Issue price: Rs 10 per share
- Minimum bid: 10,000 shares
- Minimum investment: Rs 100,000
- Maximum investment by retail investors: Rs 200,000
- Listing: BSE SME
- Download Shri Krishna Prasadam IPOProspectus from SEBI website at this link
The purpose of the IPO: The funds would be used for the following purposes.
- To raise funds for additional long-term working capital for the business of trading of agricultural product
- Meeting public issue expenses
The company has posted revenue of Rs 8.44 Lakhs for the year ended Mar-2009 and Rs 25.70 Lakhs for the year ended Mar-2013. First 11 months of this financial it year made a revenue of Rs 169 Lakhs.
The company has posted a profit of Rs 19,491 for the year ended Mar-09 Vs Rs 10,986 for the year ended Mar-2013. First 11 months of this financial year it made a profit of Rs 3.43 Lakhs.
Reasons to invest Shri Krishna Prasadam IPO
- Good revenue growth in last two years. Revenues increased from Rs 25.70 Lakhs from last year to Rs 169 Lakhs in 10 months of this financial year.
Reasons not to invest in an Shri Krishna Prasadam IPO
- Profits are very thin. It earned Rs 10,986 in the last financial year (FY 2012-13) on a turnover of Rs 25.70 Lakhs. These can be easily wiped out with a small increase in costs.
- SME IPO’s are trading in low volumes. Liquidity could be an issue.
Recommendation / Investment strategy:
- Average EPS for the last 3 years is Rs 0.15 At issue price of Rs 10, this translates to a P/E ratio of 65. Based on last financial year 2012-13 EPS of Rs 0.01, P/E ratio works out to be 1,000. Even 10 months EPS for FY 2013-14 EPS shows 0.29 which translates the P/E ratio of 34. Its competitors like Eco Friendly Foods P/E ratio is 260.81 and Lakshmi Energy and Foods P/E ratio is 2 with average in this segment of 10.4. Since company cannot issue shares below this issue price of Rs 10, investors might get tempted to buy at this rate. However, at a P/E ratio of 1,000 based on last financial year data looks very expensive.
- Though company revenues are growing, considering thin margins and high issue price, my suggestion to investors is to stay away from such SME IPO.
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Shri Krishna Prasadam IPO