JLA Infraville Shoppers IPO-SME-Can we invest?
JLA Infraville Shoppers Limited IPO would hit the market on 16th October, 2014. This SME company earned 11% net profit in FY 2013-14 which is good among the SME IPO’s. It earned revenues for a single quarter in this year, which is more than entire revenues of last year. Everything looks good for JLA Infraville Shoppers IPO? Can we invest/subscribe to such JLA Infraville Shoppers IPO or not? What are the negative points to be seen before investing in JLA Infraville Shoppers Limited IPO?
About JLA Infraville Shoppers Limited
This company is engaged in the operations of online trading and retailing of a range of products including fabrics, clothing, furnishings, electronics and computers and its accessories, surgical instruments and Hearing Aid Accessories. Their web portal i.e. infraville.com went live in fiscal 2013 and in the first financial year of operations, they could achieve a turnover, on account of commission income earned from online retail trading, Rs. 5.36 Lacs. This company is a start-up in the E-Commerce Industry. This company is also venturing into the Real Estate business which shall include inter alia purchase of land, its development and further sale. Its Promoters do not posses any past experience in real estate business.
Issue details of JLA Infraville Shoppers IPO
- IPO opens: 16-Oct-2014
- IPO closes: 27-Oct-2014
- Face Value: Rs 10 per share
- Issue price: Rs 10 per share
- Minimum shares to be applied: 10,000 and in multiples of 10,000
- Minimum investment: Rs 100,000
- No of shares: 20 Lakhs shares
- Issue size: Rs 2.00 Crores
- Lead Manager: Sarthi Capital Advisors Private Limited
- Listing: BSE SME platform
- Download JLA Infraville Shoppers IPO Prospectus from SEBI website here
Purpose of the IPO: The funds would be used for the following purposes.
- Security Deposits with various Suppliers
- Purchase of Fixed Assets, i.e. Computers, Furniture and Website Development
- Working Capital Requirements and
- Issue Expense.
- Company generated revenue of Rs 9.17 Lakhs for the year ended Mar-14 and Rs 9.38 Lakhs for the quarter ended Jun-14.
- Company posted a profit of Rs 1.52 Lakhs for the year ended Mar-14 and a profit of Rs 1.05 Lakhs for the quarter ended Jun-2014.
- EPS for FY2014 is Rs 0.24.
Reasons to invest JLA Infraville Shoppers IPO
Reasons not to invest in a JLA Infraville Shoppers IPO
- Company has generated thin revenues of Rs 9.17 Lakhs last year. Revenues for Jun-14 ending quarter are Rs 9.38 Lakhs. We cannot take quarter-1 performance into consideration as it is very short period of 3 months.
- Profits are also too small. It generated Rs 1.5 Lakh profits in the last year. Even a small shop would generate higher profits than this.
- Company business is online. Risk related to defaults of payment could be higher.
- Company does not have long term contracts.
- SME IPO’s are trading on low volume. Liquidity of such shares could be an issue. Stock brokers can easily manipulate the price of the stock.
- Minimum investment is Rs 1 Lakh which is difficult to invest by small investor.
Recommendation / Investment strategy:
- On an issue price of Rs 10 per share, based on FY 2014 EPS of Rs 0.24, P/E Ratio works out to be 42 times. There is no listed peer to compare the listing price.
- JLA Infraville Shoppers IPO is a small enterprise which has several negative factors. Thin Revenues, small profits, short operating history make this IPO un-attractive. Considering negative factors indicated above, one should be little cautious before investing in such IPO’s.
Note: One of the largest website which analyses IPO's indicates “subscribe” for this IPO. I am surprised that how they recommend for investing in such IPO, where such company does not even earn what a small establishing would be earning. Investors should review such analysis and ignore such recommendations. Recommendations backed by fundamentals and Financials is key for subscribing to an IPO. Looking for listing gains could be secondary.
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JLA Infraville Shoppers IPO (SME)
Note: I have seen some comments on my blog indicating that I reject the majority of SME IPO’s which are coming to public for investments. While on this blog (myinvestmentideas.com) I aim to explore best investment options and best saving ideas, I felt it was equally important that I should tell “What are bad investments” too. Investors should not get into a trap and burn their fingers. I welcome any suggestions to improve these SME IPO articles in future.
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