Bothra Metals & Alloys IPO – Neutral

Latest Initial Public Offerings (IPO)

Bothra Metals & Alloys IPO

Mumbai based Bothra Metals & Alloys is coming up for public issue of 48.84 lakh of shares @ Rs 25 aggregating to Rs 12.21 Crores. Current issue contains 25.92 lakhs of fresh issue and 22.92 lakhs of shares which is offer for sale. Should we invest in Bothra Metals and Alloys IPO?

About Bothra Metals and Alloys Ltd

Bothra Metals and Alloys are engaged in manufacturing of aluminum extrusions, non ferrous metal alloys, all profiles and aluminum billets. Company is also engaged in trading of aluminum scrap.

Issue details:

  • IPO opens: 12-Mar-2013
  • IPO closes: 14-Mar-2013
  • Issue price: Rs 25
  • Minimum bid: 6,000 shares and in multiples of 6,000 thereon
  • Book Running Leader managers (BRLM): Sarthi Capital Advisors Pvt Ltd
  • Listing: BSE SME Platform
  • Prospectus:

Purpose of the IPO: The funds would be used for the following purposes.

  • Working capital requirements
  • General corporate expenses
  • Issue expenses

Company financials

Bothra Metals and Alloys – Financials
Financials 2008 / 03 2009 / 03 2010 / 03 2011 / 03 2012 / 03 6 months-Sep-12
Revenues (Rs in lakhs) 5059.79 4499.24 6105.7 10009.35 11291.42 8085.2
Profits (Rs in lakhs) 123.23 51.74 432.55 456.61 393.26 266.24
Profit % 2.44% 1.15% 7.08% 4.56% 3.48% 3.29%
YoY growth of Revenue -11% 36% 64% 13% NA

Recommendation / Investment strategy: Bothra Metals and Alloys average EPS is the last 3 years is approx Rs 2.35. For 6 months ending Sep-2012 is Rs 3.52 (annualized). Post this issue the EPS would be around Rs 3.03 with a P/E ratio of Rs 8. P/E ratios for its peers in the same industry are trading at below Rs 5. Considering this, the issue price is bit expensive.

Thought the revenues are growing year on year, the pressure on margin continues. Currently the profits are @ 3.28% in last financial year. In the long run, unless the margins are in control, there are high chances that the profits would get eroded. All SME IPO’s are not getting listed gains. Investors should think twice before investing in such IPO’s.

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Bothra Metals & Alloys IPO

Suresh KP

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