GCM Capital Advisors SME IPO – Should you subscribe?
GCM Capital Advisors SME IPO-Should you subscribe?
GCM Capital advisors IPO has open for subscription now. GCM Capital advisors limited is promoted by the promoters of GCM Securities. This company is promoted in less than 1 year and earning Rs 1.3 Crores revenue has a surprising trade receivables of Rs 8 Crores (receivables are those which are to be received from customers). This company is issuing 45 Lakh shares @ Rs 20 per share aggregating to Rs 9 Crores. This company has earned Rs 48 Lakhs profit in the first year. Everything looks good about GCM Capital advisors IPO?. What are the hidden facts about this company? Should you invest in GCM Capital Advisors SME IPO?
About GCM Capital Advisors Limited
GCM Capital is a diversified financial services company mainly engaged in the business of providing financial advisory & consultancy services and engaged in treasury operations by providing funding solutions to clients both in the form of Debt & Equity and investment activities. They provide integrated solutions to clients which includes managing crucial aspects like corporate finance, working capital finance, project finance and financial restructuring to corporate. They primarily focus on small and mid size enterprises (SMEs).
Issue details of GCM Capital Advisors IPO
- IPO opens: 5-May-2014
- IPO closes: 7-May-2014
- Face value: Rs 10 per share
- Issue price: Rs 20 per share (Includes Rs 10 share premium)
- Minimum bid: 6,000 shares and multiple of Rs 6,000 thereof
- Minimum investment: Rs 120,000
- Listing: BSE SME
- Download GCM Capital Advisors prospectus
Purpose of the IPO:
The funds would be used for the following purposes.
- Augmenting long term working capital
- Meeting public issue expenses
- Company is incorporated in May-2013 and posted revenue of Rs 127.73 Lakhs for the period ended Feb-2014.
- The company has posted a profit of Rs 48.48 Lakhs for the period ended Feb-2014.
Reasons to invest GCM Capital Advisors
Reasons not to invest in a GCM Capital Advisors
- Its group company GCM Commodities is a broker with NSEL where NSEL has initiated criminal and civil proceedings.
- Company has earned revenue of Rs 1.3 Crores, but indicates that it has to receive Rs 7.8 Crores towards Trade Receivables. Out of this Rs 7.7 Crores to be recovered from NSEL as part of criminal and civil proceedings. We all know about Scam tainted NSEL. Recovery may or may not happen and in case of delay it would affect this company's operations.
- Limiting operating history < 1 year. This company was incorporated in May-2013 and coming to the public within 1 year.
- Major concentration is in Mumbai. Failure in expansion poses risk to current business.
- It has negative cash flows in Feb-2014. This indicates that company is not able to manage its cash flows and this increases cost of operations.
- SME IPO’s are trading in low volumes. Liquidity could be an issue.
Recommendation / Investment strategy:
- Average EPS for the period ending Feb-2014, 60 Paisa. At ask price of Rs 20, its P/E ratio works out to be 32.79. Its competitors like Nalwa Sons P/E ratio is 375.50 (Highest) and First leasing company is at 0.8 (Lowest) and average at the industry level is 11.2 (Finance and investments). Hence, the issue price of Rs 20 is expensive for this IPO of GCM Capital Advisors.
- Companies promoted by the promoters are running in losses in last 3 years.
- This company trade receivables looks suspicious. A company whose EPS is just 60 paisa is demanding Rs 20 per share in this IPO. My recommendation to investors is to be very cautious and stay away from such IPO’s.
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GCM Capital Advisors IPO