Mumbai based, Vidli Restaurant IPO would open for subscription on 3rd February, 2016. Vidli Restaurant Ltd runs a chain of restaurants across India. It revenues grown by 5.3 times in 1 year. It generates thin margins of 2.7%. Its issue price is offered at P/E Ratio of 2.3 times compared to its peers of 69+. What are the positive factors of the Vidli Restaurant IPO? What are its hidden factors in Vidli Restaurant IPO?
About Vidli Restaurant Limited
The company runs a chain of restaurants serving hygienic standardized food items in a quick serve format at various outlets on national highways, state highways and cities. Currently, as on December 30, 2015, Company has 39 restaurants in western & central India having presences on major highways. The company believes in providing quality food in hygienic surroundings at convenient locations for serving its customers better. Hygiene, quality and customer satisfaction are core concepts exercised by its team at all outlets which distinguishes from local restaurants.
Issue details of Vidli Restaurant IPO
- IPO opens: 3-Feb-2016
- IPO closes: 5-Feb-2016
- Face Value: Rs 10 per share
- Issue price: Rs 10 per share
- Issue size: Rs 131 Lakhs
- Lead Managers: Panthomat Capital Advisors Pvt Ltd
- Listing: BSE SME
- Download Vidli Restaurant IPO Prospectus from SEBI Website at this link
Purpose of the IPO
1. Finance establishment of new food joints;
2. General Corporate Purpose;
3. Issue Expenses
Company Financials (reinstated)
- Company generated revenue of Rs 48.2 Lakhs for the year ended Mar-14 and Rs 259.07 Lakhs for the year ended Mar-15.
- Company posted a profit of Rs 4.42 Lakhs for the year ended Mar-14 and profit of Rs 6.89 Lakhs for the year ended Mar-2015.
- Its restated EPS for FY 2015 is Rs 4.2 and last 3 years average EPS of Rs 16.76.
Reasons to invest Vidli Restaurant IPO
- Revenue has increased by 5 times in just 1 year (FY2015 Vs FY2014)
Reasons not to invest in a Vidli Restaurant IPO
- It generated thin margins of 2.7% in FY2015.
- Certain of its Directors, Promoters and Group Companies are currently involved in legal proceedings pending at different levels of adjudication before various courts and tribunals. A classification of legal proceedings and the monetary amount involved in the cases currently outstanding is mentioned in brief below.
- Company success depends significantly on the value, perception and marketing of brands namely “VITHAL KAMATS” and “KAMATS”.
- Group company Kamat Hotels (India) Limited was referred to Corporate Debt Restructuring cell during Fiscal 2013. Post failure of CDR, Kamat Hotels (India) Limited received recall notices and subsequently many lenders have assigned the loans in favour of asset reconstruction companies
- They have a very limited operating history, which may make it difficult for investors to evaluate its historical performance or future prospects.
- They generate a major portion of its revenue from operations from franchisees outlets. Their discontinuation could have an adverse impact on its revenue and results of operations.
- Some of its Group companies have incurred losses during the last three fiscal years.
- SME IPO’s are trading in low quantity. One may have liquidity issues.
- Other risk factors (Internal and external) can be viewed in prospectus Page no. 16 onwards.
Recommendation / Investment strategy
- On the issue price of Rs 10 and based on FY2015 EPS of Rs 4.2, its P/E Ratio works out to be 2.38. Similarly, based on last 3 years EPS of Rs 16.76, P/E Ratio works out to be 0.8. Means company is asking the issue price of Rs 10 in the P/E ratio of 0.8 to 2.38. Its peers like Jubilant Foods P/E ratio is 79.4 (Highest) and Speciality Restaurants is 69.1 (Lowest). Hence the issue price of Rs 10 is reasonably priced.
- Vidli Restaurant Limited revenues have grown aggressively in 1 year. However, it generates thin margins of 2.7%. It generated higher margins for the 6 months ended Sep-15, however, we need to see such higher margins consistently. Its share price is reasonably priced. High risk investors can invest in this IPO.
Disclaimer: I do not have an 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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Vidli Restaurants IPO – Should you invest