Agrimony Commodities IPO – Should you buy?
Mumbai based Agrimony Commodities has come up with an IPO and it would open for subscription from today (31st January, 2014). Agrimony Commodities IPO would get listed on the BSE SME Platform. In this article, I would analyze about the Agrimony Commodities IPO and whether it is good for investment or not.
About Agrimony Commodities
Agrimony Commodities are currently employed in the business of trading of iron and steel products, suitings and shirtings and other dress materials and agricultural products.
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Issue details of Agrimony Commodities IPO
- IPO opens: 31-Jan-2014
- IPO closes: 4-Feb-2014
- Face value: Rs 10 per share
- Issue price: Rs 10 per share
- Minimum bid: 10,000 shares for retail investors and in multiples of 10,000 shares thereof. Maximum shares to retail investors are 20,000 only
- Minimum investment: Rs 100,000
- Lead managers: Unicon Capital Services Private Limited
- Listing: BSE SME
Download Prospectus of Agrimony Commodities IPO
The purpose of the IPO: The funds would be used for the following purposes.
- Augmenting long term capital
- Meeting publish issue expenses
- The company has posted revenue of Rs 260.75 Lakhs for the year ended Mar-2009 and Rs 12 Lakhs for the year ended Mar-2013. However, revenues for 8 months ended Nov-2013 are Rs 1,357.47 Lakhs.
- The company has posted a loss of Rs 5.65 Lakhs for the year ended Mar-09 Vs profit of Rs 1.97 Lakhs for the year ended Mar-2013. It posted Rs 6.49 Lakhs profit for the 8 months ended Nov-2013.
Detailed financial summary is indicated below
Reasons to invest Agrimony Commodities IPO
Reasons not to invest in Agrimony Commodities IPO
- Company revenues are not consistent. Its revenues were in decline mode and reduced to Rs 12 Lakhs for the year ended Mar-13. Suddenly its revenues have jumped to Rs 1,357 Lakhs for 8 months in this year.
- The company runs on thin margins. Its profits are just Rs 1.97 Lakhs for the year ended Mar-2013. Even for the 8 months ended Nov-2013, it posted a profit of Rs 6.49 Lakhs on turnover of Rs 1,357.47 Lakhs which is just 0.48% profitability. These thin margins can be easily wiped out with small change in market condition and competition.
- The IPO’s listed on the BSE SME platform are trading on low volume and liquidity is an issue.
- Minimum investment required is Rs 1.00 lakhs.
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Recommendation / Investment strategy:
- Average EPS for the last 3 years is Rs 1.42. At issue price of Rs 10, this translates to a P/E ratio of 7.07. Even comparing to FY-12-13 EPS the P/E ratio translates to 5.08. It peers like Nirav Commercial are trading at a P/E ratio of 148.7 (Highest) and Lahoti Overseas at P/E ratio of 1.3(Lowest). Hence the issue price of Agrimony Commodities IPO looks expensive for such SME IPO.
- Though there is a sudden jump in revenues in last 8 months ended Nov-2013, the profits are thin.
Considering above facts, my suggestion to investors is to be little cautious before investing in such IPO.
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Agrimony Commodities IPO