Amrapali Fincap SME IPO – Should you subscribe?
Amrapali Fincap SME IPO – Should you subscribe?
Amrapali Fincap IPO will open for subscription today, i.e. 20th July 2015. Amrapali Fincap Limited is mainly engaged into the business of providing loan and advances. Its revenues grown by 2.5 times in last 5 years. It earned 30% profits for the 10 months ended Jan-2015. Everythink looks great correct? Read the complete article to change your view on this IPO. What are the hidden factors of Amrapali Fincap Limited IPO? Should you subscribe to this Amrapali Fincap IPO?
About Amrapali Fincap Limited
Amrapali Fincap Limited company mainly engaged in the business of providing loans and advances. Majority of its loan and advances are provided to parties which are related to the promoter or associate concern of promoters. It provides unsecured Short term loans to its customers. It provides these loans to select customers and conduct credit checks for these loans as they are unsecured. The aggregate value of the short term loans and advances of our Company stood at Rs 11,862.05 Lakhs and Rs 11,422.16 Lakhs as on March 31, 2014 and January 31, 2015 respectively.
Issue details of Amrapali Fincap IPO
- IPO opens: 20-Jul-2015
- IPO closes: 22-Jul-2015
- Face Value: Rs 10 per share
- Issue price: Rs 120 per share
- Minimum Shares: 1200 shares and in multiples of 1200 shares there-off
- Minimum amount: Rs 144,000
- Issue size: Rs 42.48 Crores
- Lead Managers: Corporate Strategic Allianz Ltd
- Listing: BSE SME
- Download Amrapali Fincap Limited IPO Prospectus from BSE Website at this link
Purpose of the IPO:
1. Purchase and set up of the office space in Ahmedabad.
2. Investment in NBFC company
3. General Corporate Purpose.
4. To meet the issue expenses.
Company Financials (reinstated)
1) Company generated revenue of Rs 265.45 Lakh for the year ended Mar-10 and Rs 675.90 Lakhs for the year ended Mar-14. It has generated revenue of Rs 515.22 Lakhs for 10 months ended Jan-2015.
2) Company posted a Profit of Rs 8.13 Lakhs for the year ended Mar-10 and a Profit of Rs 18.71 Lakhs for the year ended Mar-2014. It has generated profit of Rs 152.23 Lakhs for 10 months ended Jan-2015
3) Its EPS for FY 2013-14 is Rs 0.19 and 3 years weighted Avg EPS is Rs 0.12. Its EPS for the 10 months ended Jan-2015 is Rs 1.54.
Reasons to invest Amrapali Fincap IPO
Reasons not to invest in an Amrapali Fincap IPO
- Inconsistent revenue growth in last 6 years. Revenues significantly increased till year ended Mar-2012 and revenues are in down trend now. It had revenues of Rs 80.13 Crores for year ended Mar-12, however it generated revenue of Rs 6.75 Crores only year ended Mar-14. Such inconsistent revenue growth and revenue fall would pose risk to company performance in future.
- It generated negative revenue from operations for sale of shares / commodities to the extend of Rs 2.8 Crores for 10 months ended Jan-15. However, it generated “other income” for Rs 7.91 Crores, hence net income become Rs 5.15 Crores. You would not get “other income” every year. Means, in future, there is many chances that the company can get negative revenues, forget about revenue growth.
- It generated almost zero profits in the last 4 years (year ended Mar-14).
- For 10 months ended Jan-2015, it generated 30% profits. Don’t get tempted by this. It came through "Other income" which you would not get every year. Income from business operations are negative, means, in future company can incurr losses if we consider similar performance.
- The company has entered into MOU for acquiring NBFC company for which permission from RBI is yet to be obtained.
- They are involved in a number of legal proceedings which, if determined against the company, could adversely affect its business and financial condition.
- Majority loans and advances are to the companies, firms in which relatives of the director are involved.
- Investments and Trading Business has reported gross losses in the past. Sustained losses in the future from this vertical would lead to weaker financial performance and affect its sustainability.
- Company business requires to obtain and renew certain registrations, licenses and permits from government and regulatory authorities and the failure to obtain and renew them in a timely manner may adversely affect its business operations.
- Company's future success depends to a significant extent on its Promoters, Directors & KMPs.
- The company has experienced negative cash flows and any negative cash flows in the future could adversely affect its financial conditions and results of operations.
- Its Group Companies have incurred losses in the past.
- Its business and financial performance is particularly vulnerable to interest rate risk.
- Its operations are considerably located in Gujarat failure to expand its operations may restrict growth and adversely affect its business
- 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 120 and EPS for FY 2014-15 of Rs 0.19, P/E Ratio works out to be 631. At an issue price of Rs 120 and weighted average EPS of Rs 0.12, P/E Ratio works out to be 1000. I would ignore EPS for the 10 months ended Jan-15 as it contains abnormal other income. Means, the company is asking issue price in between 631 and 1000 P/E Ratio.
- Its competitors Stellar Capital Services share price is trading at a P/E Ratio of 1,411 (Highest) and SRG Securities Finance Ltd at P/E Ratio of 28 (Lowest). Hence, the issue price of Rs 120 per share is very high.
- Amrapali Fincap Limited revenues are inconsistent and in a downtrend. It generated almost zero profits in last 4 years. Profits for the 10 months ended Jan-15 are high due to higher other income. It has several negative factors indicated above. Investors should be careful and should stay away from such IPO’s.
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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