Jet Infraventure IPO-SME-Can we invest?
Jet Infraventure IPO would hit the market on 30th October, 2014. This company has earned a 12 % profit in FY 2013-14. Revenues have shown significant growth in last 5 years. Everything looks ok on face of the Jet Infraventure IPO. Can we invest in a Jet Infraventure IPO? What are the positive and negative points in Jet Infraventure Limited IPO?
About Jet Infraventure Limited
Jet Infraventure is growing real estate development company headquartered in Mumbai and focusing on residential projects. This company subcontracts to third party contractors. They have been executing projects in Gujarat and Maharastra.
Issue details of Jet Infraventure IPO
- IPO opens: 30-Oct-2014
- IPO closes: 11-Nov-2014
- Face Value: Rs 10 per share
- Issue price: Rs 125 per share
- Minimum shares to be applied: 1,000 and in multiples of 1,000
- Minimum investment: Rs 125,000
- No of shares issued: 3.6 Lakh shares
- Issue size: Rs 4.5 Crores
- Lead Managers: Pantomath Capital Advisors Private Limited
- Listing: BSE SME platform
- Download Jet Infraventure IPO Prospectus from BSE website here
Purpose of the IPO: The funds would be used for the following purposes.
- Working Capital Requirements.
- Repay certain unsecured loans
- General corporate purpose
- Issue Expenses.
- Company generated revenue of Rs 0.96 Lakhs for the year ended Mar-10 and Rs 858.72 Lakhs for the year ended Mar-14.
- Company posted a loss of Rs 0.88 Lakhs for the year ended Mar-10 and a profit of Rs 58.34 Lakhs for the year ended Mar-2014.
- Company has not earned any revenue in FY 2012-13.
- EPS for FY2014 is Rs 13.29
- Average EPS for the past 3 years is Rs 5.93
Reasons to invest Jet Infraventure IPO
- Good revenue growth in last 5 years.
- Profits are at 7% of its revenues, which is good among the SME which came for IPO's.
Reasons not to invest in a Jet Infraventure IPO
- Company has incurred loss for 2 financial years out of last 5 financial years.
- Company has not earned any revenues for FY 2013.
- Business concentrated in Gujarat and Maharastra only.
- Limited operational history in real estate industry.
- Promoter group company Jet Infotech Limited does not have adequate info / records for various regulatory requirements. It could lead to regulatory actions.
- Company promoters involved in legal proceedings and any adverse decisions in such proceedings can affect business operations.
- It has negative cash flows for the past 3 years. This indicates that it need to borrow loans for high rate of interest and has difficulty in managing working capital requirements. This would affect the profits of the company.
- SME IPO’s are trading on low volume. Liquidity of such shares could be an issue. Stock brokers can easily manipulate the price of the stock.
Recommendation / Investment strategy
- On an issue price of Rs 125 per share, based on FY 2014 EPS of Rs 13.29, P/E Ratio works out to be 9.4 times. Last 3 years EPS is Rs 5.93 and P/E ratio works out to be 21.07. Its competitors P/E Ratio is 126 (Highest) and 3.6 (Lowest) and the industry average is 25.9. Considering 13.29 to 21.07 P/E ratio of Jet Infraventure IPO for the issue price of Rs 125 seems to be high. Post the issue, Net Asset Value (NAV) would be Rs 47.91 and on a issue price of Rs 125 is priced high.
- Jet Infraventure IPO has several negative factors. Though company revenues grew in the last 5 years, there are a few key things to be noted. Zero revenues in last year FY 2013, issue price being very high etc., are some of the major concerns. We should wait and watch the performance for another 1-2 years and if this company shows consistent performance, one can look at investing in such company with discounted price. As of now, investors should avoid investing in such IPO.
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