Cawasji Behramji Catering Services IPO – Should you invest?
Mumbai based, Cawasji Behramji Catering Services IPO will open for subscription on 29th September, 2015. Cawasji Behramji is engaged into business of providing food catering and housekeeping services. Its revenues have grown by 1.7 times in last 5 years. It earned 1.3% profits for last financial year. I stopped SME IPO reviews sometime back as investors are not getting benefitted much with such IPO investments. Since this is the unique company which into catering services and has come to IPO, it is attracting several investors. What are the positive factors of Cawasji Behramji Catering Services IPO? What are hidden factors of Cawasji Behramji Catering Services Ltd IPO? Should you invest in such IPO?
About Cawasji Behramji Catering Services Ltd
Its present business composition can be categorised into the following divisions:
1. Offshore catering & housekeeping services: They provide food catering & housekeeping services to various Indian and International shipping and oil exploration companies. They operate and manage staff cafeterias, on a contract basis, at the premises of its corporate clients on different locations. Company provides services on locations such as Offshore Barges, Rigs, Diving Vessel, Supply Vessels and Remote Production Platforms.
2. Onshore catering services: They provide food catering services to its corporate clients, banquets, parties & events and gymkhanas. Under this division, they operate and manage services, on a contract basis, at the premises of its clients.
3. Fine Dining Restaurant: They operate a dedicated restaurant under the brand of “me so happi” located in Khar (W), Mumbai. This restaurant under the aforesaid brand name commenced its operations in September, 2014. Its eatery restaurant offers a fun-dining experience with its service focusing on providing consumers with quality social engagement, fun and plays along with quality food and service in modern ambience.
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Issue details of Cawasji Behramji Catering Services IPO
- IPO opens: 29-Sep-2015
- IPO closes: 5-Oct-2015
- Face Value: Rs 10 per share
- Issue price: Rs 14 per share
- Minimum Shares: 10,000 shares
- Minimum amount: Rs 140,000
- Issue size: Rs 1.86 Crores
- Lead Managers: Hem Securities Ltd
- Listing: BSE SME
- Download Cawasji Behramji Catering Services Limited IPO Prospectus from this SEBI link here
Purpose of the IPO
- The Objects of the Offer are to achieve the benefits of listing the Equity Shares on the Stock Exchanges and to carry out the sale of 13.3 Lakh Equity shares by the Selling Shareholder (by one of the Promoter).
- Company will not receive any Proceeds from the Offer.
Company Financials (reinstated)
- Company generated revenue of Rs 37.49 Crores for the year ended Mar-11 and Rs 64.16 Crores for the year ended Mar-15.
- Company posted a Profit of Rs 1.11 Crores for the year ended Mar-11 and a Profit of Rs 0.82 Crores for the year ended Mar-2015.
- Its EPS for FY 2015 is Rs 1.64 and last 3 years average EPS of Rs 3.18.
Reasons to invest Cawasji Behramji Catering Services IPO
- Good revenue growth in last 5 years. It revenues increased by 1.7 times in last 5 years. However in last 1 year, its revenues have dropped by 12%.
- No listed peers in such business model in India.
Reasons not to invest in Cawasji Behramji Catering Services IPO
- Company will not receive any proceeds from the Offer. This IPO is only for listing benefits and offer for sale from one of the promoter.
- There are certain outstanding legal proceedings involving Company which are pending at different stages before the Judicial / Statutory authorities. Any rulings by such authorities against Company may have an adverse material impact on its operations.
- Company require several statutory and regulatory permits, licenses and approvals to operate, some of which Company has either received, applied for or is in the process of application. Many of these approvals are granted for fixed periods of time and need renewal from time to time. Company has made delays in paying outstanding statutory dues of service tax.
- Company Registered Office and other premises from where they operate are not owned by them.
- Company operates its centralized warehouse which is subject to certain legal disputes.
- Company has inadvertently failed to ensure compliance with certain statutory provisions under the Companies Act. Such non-compliances/lapses may attract penalties from relevant regulatory authorities.
- Any penalty or action taken by any regulatory authorities in future for non-compliance with provisions of Companies Acts could impact the financial position of the Company to that extent.
- Promoter and Chairman & Managing Director, Mr. Alfred Micheal Arambhan was holding multiple DIN in the past.
- They have limited operating history and investors may not be able to analyse its past performances or future prospects.
- Company has allotted equity shares in the last one year, which are a price below the Offer price.
- The Indian food services industry has a history of being fragmented and unorganized, lacking sufficient reliable industry data. As a result, third party statistical and financial data in the Prospectus may be incomplete or unreliable.
- Other risk factors (Internal and external) can be viewed in prospectus Page no. 12 onwards.
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Recommendation / Investment strategy
- At an issue price of Rs 14 and on last financial year FY14-15 EPS of Rs 1.64, P/E ratio works out to be 8.54 times. There is no listed peers in similar business in India, hence we cannot say whether issue price is high or under priced.
- Though, Cawasji Behramji Catering Services revenues have been growing consistently in last 5 years, there is dip in revenue by 12% in last financial year. It generated thin margins of 1.3% in last financial year and last 3 years margins are in declining mode. Though there are no listed companies in India doing similar business, I would not get excited with just with business model, but merely the performance of the company. I would advise investors to stay away from such IPO’s where performance is in declining mode and which generates thin margins.
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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Suresh
Cawasji Behramji Catering Services IPO
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I am a Ship Chandler and this company is very well known in the industry for the services it provides and is one of the oldest in the business, one can say that the company is spoken of in the same breath as RKHS (Now Sodexo) atleast in the offshore and marine industry for the catering business it provides. It’s competitors of repute include RKHS and Garuda,the others are fragmented.
Being from the industry I can safely say that the Profit margins are higher than being reported and usually a lot of accounting liberty is taken to reduce the margins, both by the big offshore companies as well as their suppliers( one reason why I don’t invest in any offshore or shipping company)
Also, its restaurant me so happi in Khar has been temporarily closed since the last 5 months, the official reason being it is under renovation, I highly doubt the same as it was a relatively new restaurant in no need of further renovation(I was there with my wife just 2 days before they closed down for ‘renovation’), if anything the place looked like it was started illegally in the entrance lobby of the building and thus may run into some trouble with the authorities.
I would advise people to stay away from not only this but all offshore and shipping related companies in general, the numbers reported can never be relied upon, I am a vendor to many of them and personally know how badly short of funds these companies are(payments for material supplied taking up to 6 months to 1 year is the norm). Some companies which are spoken of as potential multibaggers and future infrastructure giants haven’t paid their staff salaries for months. Just one word stay away.
Krish We hope your comments are based on facts really its is great support to retail investor for taking decision.
Hi Suresh Sir,
Are you planning to post your review on Vishal Bearings Ltd SME IPO?
I have seen some positive reviews on this SME IPO.
But I want to see your review before proceeding with my decision on whether to invest in it or not.
I read every article of yours and appreciate your effort to educate the common people like us.
regards
Bhanu
Hi Bhanu, I stopped SME IPO reviews. SME IPO’s are not giving much returns and are high risk, hence stopped reviewing them.
Wonder how any sensible investor would apply for Cawasji Behramji Catering IPO, more particularly when it is ‘offer for sale’ meaning thereby that no money will come to the company for business purpose.
Thank you Sir
really negative factors more than positive
sir excellent review of the cawas ji beharam ji sme ipo. thanks
The company badly lacks on corporate governance front. so many major litigations. Even it has not paid service tax of Rs.408.25 lacs unable to understand whether it was included in topline or not ! if yes the bottomline would badly have a hit in red. Nevertheless it is going to affect cash flow invariably.
More than 1077 lacs receivables are > 6 months; cause of concern.
Very heavyly leveraged.
Litigation on every front may be government, may be lessor, may be receivables, may be supplier everyone.
Interestingly they are asking for market cap of Rs. 7.50 cr only for such an old company, the track record of HEM securities is also good. Getting only Rs.1.86 cr that to a promoter not the the company. any hidden agenda !
Inder, Thanks. There are 2 point agenda as of now. One is to sell promoter share holding for Rs 1.8 Crores. Second is getting listed on stock exchange, promoters would know the value of the company.