Gala Print City IPO – Should you Invest?
Gala Print City IPO – Should you Invest?
Gala Print City IPO opened for subscription today, i.e. 30th June, 2015. Gala Print City engaged in the business of printing and offering multi-colour offset printing services etc., It plans to raise Rs 3.04 Crores through this IPO. Company has increased revenues by almost 11.8 times in last 3 years. What are the positive factors in Gala Print City Ltd IPO?. Should you invest in this Gala Print City IPO? What are the risk factors to be considered before you invest in a such IPO’s?
About Gala Print City Limited
It is engaged in the business of printing and offering multi-color offset printing services, single color offset printing services, commercial printing services for calendars, catalogs, brochures, posters, annual reports, manuals, etc. They offer quality products and services at cost effective prices and have graded themselves as one the fastest growing printing solution. They claim that with their inflexible attitude towards the quality of printing, they have obtained a long list of reputed clientele. Backed by their team of qualified and skilled professionals, the company prefers cutting-edge technologies for carrying out each project with keen interest in clients’ specified instructions and exact requirements.
Issue details of Gala Print City IPO
- IPO opens: 30-Jun-2015
- IPO closes: 6-Jul-2015
- Face Value: Rs 10 per share
- Issue price: Rs 24 per share
- Minimum Shares: 6000 shares and in multiples of 6000 shares there-off
- Minimum amount: Rs 144,000
- Issue size: Rs 3.04 Crores
- Lead Managers: Guiness Corporate Advisors (P) Limited
- Listing: BSE SME
- Download Gala Print City Limited IPO Prospectus here
Purpose of the IPO:
1. To part-finance incremental working capital requirements
2. General corporate expenses
3. To meet the expenses of the Issue
Company Financials (reinstated)
- Company generated revenue of Rs 6.38 Lakh for the year ended Mar-11 and Rs 475.45 Lakhs for the year ended Mar-14. It earned revenue of Rs 1,098.73 Lakhs for 9 months ended Dec-14.
- Company posted a Profit of Rs 0.14 Lakhs for the year ended Mar-11 and a Profit of Rs 1.47 Lakhs for the year ended Mar-2014. Its profit is Rs 7.92 Lakhs for the 9 months ended Dec-2014.
- Its basic EPS for FY 2013-14 is Rs 0.15 and weighted Avg EPS is Rs 1.82. EPS for nine months ended Dec-2014 is Rs 0.45.
Reasons to invest Gala Print City IPO
- Good revenue growth in last 3 years. If we annualize 9 months revenue of FY 2014-15 to entire year, it would cross Rs 1,400 Lakhs. This indicates that company has grown almost 11.8 times in last 3 years.
Reasons not to invest in a Gala Print City IPO
- Thin margins of 0.3% for FY 2013-14 and 0.7% for 9 months ended Dec-2014. Such thin margins would erode with small increase in raw material.
- They are dependent on its management team for success whose loss could seriously impair the ability to continue to manage and expand business efficiently.
- The Registered Office of Company is not owned by them.
- In the 12 months prior to the date of filing the Prospectus, the Company had issued Equity Shares at a price, which is lower than the Issue Price.
- One of the Group Companies has posted negative profits in last financial year.
- They have entered into certain related party transactions and may continue to do so.
- They have reported negative cash flows.
- The deployment of funds is at the discretion of its Management and its Board of Directors, though it shall be monitored by the Audit Committee.
- The shortage or non-availability of power may adversely affect the manufacturing processes and the performance may be affected adversely.
- The company does not have any long-term contracts with its customers, which may adversely affect the results of operations.
- Minimum investment required is Rs 1.44 Lakhs to subscribe to this IPO.
- Other risk factors (Internal and external) can be viewed in prospectus Page no. 10 onwards.
Recommendation / Investment strategy:
- At an issue price of Rs 24 and EPS for FY 2013-14 of Rs 0.15, P/E Ratio works out to be 160. At an issue price of Rs 24 and weighted average EPS of Rs 1.82, P/E Ratio works out to be 13.17. Since latest EPS is low, we need to consider P/E Ratio of 160 for comparison purpose which is very high.
- There is no listed company exclusively in similar business, hence we cannot compare whether the share price is high or low. However, its NAV before the issue is around Rs 10 and after IPO issue, it would be Rs 13.94. Hence, asking price of Rs 24 is very very high.
- Gala Print City Limited revenues show good improvement in last 3 years. However, thin margins, high issue price and other risk factors indicated above, makes this IPO negative. One should stay away from such IPO’s where investors would not get any profits out of it.
Disclaimer: I do not have interest in investing in this IPO. The idea of giving positive and negative factors to investors in this article is to create awareness and education about this IPO. One should NOT constitute this as investment advice to buy or not to buy. Please consult your investment advisor before you invest in such high risk investment options.
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Gala Print City IPO – Should you subscribe
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