Tarini International SME IPO-Should you buy?
Delhi based Tarini International SME is coming up with an IPO to issue 29.78 Lakh shares @ Rs 41 per share. Tarini International SME IPO would open for subscription on 9th June, 2014. Tarini International has generated revenue of Rs 79.90 Lakhs and profit of Rs 2.36 Lakhs for 9 months ended Dec-2013. It provides financing and technical consulting related to Hydro Power generation. All looks good? What are the hidden facts about Tarini International IPO? Investors should have a complete review and analysis before investing in such IPO’s
About Tarini International Limited
Tarini International have been evolved as an engineering arm to provide financial and technical consultancy related to Hydro Power generation, Transmission and Distribution and Infrastructure. Their current projects are well geographically based in India and the sub African Continent. Over a period of time, they have been developed as an integrated player providing turnkey service under one umbrella for designing, construction, generation, transmission and distribution. They also claim to be professionally competent to undertake projects from concept to commissioning. This entire set of activities, completes the value chain by providing the synergy of backward as well as forward integration.
Issue details of Tarini International IPO
- IPO opens: 9-June-2014
- IPO closes: 13-June-2014
- Face value: Rs 10 per share
- Issue price: Rs 41 per share
- Minimum investment: Rs 141,000
- Listing: BSE SME platform
- Lead Managers: Guiness Corporate Advisors Private Limited
- Download Tarini International IPO Prospectus from SEBI website here
Purpose of the IPO
- To finance Long Term incremental working capital requirements
- Interior and renovation of our Registered Office.
- Brand Building
- General corporate expenses
- To meet the expenses of the Issue
- Company has posted revenue of Rs 218.09 Lakhs for the year ended Mar-2009 and Rs 128.58 Lakhs for the year ended Mar-2013, indicating a negative growth of 44% in last 5 years. First 9 months of this financial year (ended Dec-2013) it made a revenue of Rs 79.90 Lakhs.
- Company has posted a profit of Rs 74.94 Lakhs for the year ended Mar-09 and a loss of Rs 9,000 for the year ended Mar-2013. First 9 months of this financial year (ended Dec-2013) it made a profit of Rs 2.36 Lakhs.
Reasons to invest Tarini International IPO
Reasons not to invest in Tarini International IPO
- Company revenues are in a down trend in the last 5 years
- Company profits are down in the last few years
- Company incurred a loss of Rs 0.09 Lakhs for the Financial year 2012-13.
- Its group companies have incurred a loss in the last 3 years. This indicates poor promoter capabilities.
- It has negative cash flows in last 3 years. This indicates that it need to borrow loans for high rate of interest and has difficulty in managing working capital requirements. This would affect the profits of the company.
- There is outstanding litigations against company, promoters and promoter group companies, if determined adversely, could affect business and financial operations
- It has unsecured loan of Rs 492.55 Lakhs payable on demand. If demanded, this company needs to borrow money at high interest and it would further affect the company financial performance.
- SME shares are trading at low volumes. Liquidity of such shares could be an issue.
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Recommendation / Investment strategy
- It has incurred loss in FY 2012-13, hence P/E ratio is not applicable. Last 3 years EPS of Rs 0.59 translates the P/E ratio to 69.69. The P/E ratio of its competitors of the highest is 96.01 and lowest is 1. Average at the industry level is 21.3.
- I really do not know how SEBI allows IPO’s like Tarini International SME IPO where the company has incurred loss of Rs 9,000 in the last financial year and demand Rs 41 as share price.
- Considering pathetic financial performance, high issue price and several risks involved, investors should be very cautious and stay away from such IPO’s.
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Tarini International SME IPO