Momai Apparels IPO (SME) – Can we invest?
Momai Apparels Limited (SME) is coming up with a public issue IPO of 33 L Shares and raising ₹ 27-30 Crores (planned fund mobilization of ₹ 40 Crores, but already mobilized ₹ 13 Crores). Momai Apparels IPO issue is priced at ₹ 78-90 per share. There are several positive points about this SME IPO. What should be your call on this Momai Apparels IPO? Should you invest in a Momai Apparels SME IPO? What are the risk involved in this SME IPO?
About Momai Apparels Limited
Momai Apparels Limited is incorporated in 2010 and a subsidiary of Ashapura Intimates Fashion Limited. It is one of the leading companies in loungewear. This company is engaged in the business of manufacturing of non-branded intimated garments such a lounge wear, bridal night wear, honeymoon set, night wear, sports wear, leggings etc.
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Issue details of Momai Apparels IPO
- IPO opens: 25-Sep-2014
- IPO closes: 30-Sep-2014
- Face value: ₹ 10 per share
- Issue price: ₹ 78 to ₹ 90 per share
- Minimum investment: Would be indicated after final prospectus is published by SEBI
- Minimum shares to be invested: Would be indicated after final prospectus is published by SEBI
- No of shares: 33 Lakh shares
- Issue size: ₹ 30 Crores
- Lead Managers: Pantomath Capital Advisors Private Limited
- Listing: NSE SME platform
- Download Momai Apparels IPO Prospectus from NSE website here
Purpose of the IPO: The funds would be used for the following purposes.
- Acquisition of land for setting up a new manufacturing facility
- To meet long term capital requirements
- Meet issue expenses
- General corporate purpose
Company Financials
- Company generated revenue of ₹ 3,153 Lakhs for the year ended Mar-12 and ₹ 11,745 Lakhs for the year ended Mar-14 indicating a strong revenue growth of 90% simple yearly growth in just 3 years (not CAGR).
- Company posted a profit of ₹ ₹ 58.21 Lakhs for the year ended Mar-12 and a profit of ₹ 326.8 Lakhs for the year ended Mar-2014.
Reasons to invest Momai Apparels IPO
- Strong revenue growth in last 3 years.
- Good profit improvement in last 3 years
- Company proposes to expand 5 fold to meet the rising demand of its products and planning to set-up facility in Gujarat. This would boost company revenues in coming years.
- This IPO has been rated by CARE as “SME Fundamental Grade 4/5” indicating “Very Good Fundamentals”.
Reasons not to invest in an Momai Apparels IPO
- Company has a limited operating history of 3 years. It may be difficult for investors to assess performance in the long run.
- Majority of revenues are from holding company Ashapura Intimates Fashion Limited. Any future loss of such company would have a material impact for Momai Apparels Limited.
- This company does not own any brand. It acts a contract manufactures for others who owns brand and network.
- Approvals for setting up new facility are yet to be completed. Any delay in receiving, such approvals could delay the expansion plan and it would have an impact on revenues and margins.
- Such companies would require a large amount of working capital. In case of inability to meet the working capital requirement would adversely impact company performance.
- It has negative cash flows in the last 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.
- Company profits are still thin like any other SME
- 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.
Also Read: Should we consider Platinum as investment option?
Recommendation / Investment strategy
- On an issue price of ₹ 78 to ₹ 90, based on FY 2014 EPS of ₹ 5.96, P/E Ratio works out to be in between 13 to 15 times. Last 3 years average EPS is not comparable as FY11-12 EPS is very high. Its competitors P/E Ratio is 55 (Highest) and 29 (Lowest). Considering 13 to 15 P/E ratio of Momai Apparels IPO for the issue price of ₹ 78 to ₹ 90 is considered to be reasonable.
- Momai Apparels IPO has several positive factors. Good revenue growth in last 3 years. Profits are also increasing. Considering 5 fold expansion plan, it would boost revenues in coming years. This is definitely a good bet for long term investors.
- I would advise investors to invest in this IPO for a 2 to 3 years time frame considering negative factors indicated here.
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Suresh
Momai Apparels SME IPO-Can we invest
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Any idea what happened to this scrip?
This IPO is going to list on 16th. Are you suggesting to buy on listing date?
If you say Yes, do you think the price will go down in later hours on listing day or after few days? or shall we buy it for day high price on 1st hour?
Thank you all for your suggestions and help.
Considering Shemaroo experience, I feel, we should wait and watch Sri
Hi Suresh,
Thank you for nice article with great analysis. I read that you will be stopping your analysis report for the SME IPOs from now onwards. But you see, it helped me to decide on Momai and Atishay Infotech.
So Please continue you articles even for the SME IPOs (Or at least for good SME IPOs)
Thanks
Can u share how can we purchase it online?
Nirav, Even this can be purchased through demat account. However some of the brokers are not offering SME IPO’s
HDFC SEC doesnt trade in SME IPO 🙁
I was waiting very eagerly for this IPO. I even got the money ready for this .. 🙁
But HDFC SEC is not providing. Why is this ?
Majority of SME IPO’s subscription is not being offered by ICICI direct or HDFC Securities. It is their decision.
This one is offered in Axis bank. If you had axis bank SB a/c and a demat a/c you might have applied for this one. Having savings a/c with Axis, SBI, etc. will help sometimes. You can use the existing demat a/c which you linked to your broker is enough.
1600 min shares lot
1600 * 90 = 144000
sir my question is, can we apply for this and if alloted then sell on listing day as it open 10 or 20% up than ipo price?
i dnt want to hold this for long term
Hi Nirav, Your info about 1600 minimum shares might be right. However this info is not available at NSE nor final prospectus is available. Where you are getting this info ? Yes you can sell them for listing gains
I got info from here
http://www.moneycontrol.com/stocks/pickoftheweek/equityreportfinal.php?eqid=MA05
Hi Nirav, Thanks. This info was published after I published the article. However I prefer writing something mentioned on SEBI website rather than some website. Anyway useful for me from now on.
Dear Suresh
I was also not allotted Sharda Cropchem IPO, in fact I had applied for 200 shares on the opening day at 9.07 a.m. what could be the possible reason. rgds
Raghavan, Same with me. I need to analyse more on how one can get IPO shares when applied early.
Hi Suresh/Raghavan,
Does it work like that?
I don’t think that registrar will consider the time you apply for shares.
That why people apply for these IPOs on the last day.
Hi Suresh,
I am not sure but we can’t apply through demat account for this SME IPO.
We need to fill Blue colour form for ASBA Applications.
Please confirm my understanding is correct.
Best Regards,
Nikhil
Nikhil, Some of the stock brokers are not considering SME IPO’s for subscription. In such case you need to open demat account with small brokers to apply for such SME IPO’s Otherwise, you can apply them manually. However there is nothing like filling seperate form for ABSA. ABSA is a process where your money would be blocked for the period of IPO allotment and nothing to do with demat account
You can use your existing demat a/c and use the Savings a/c with the bank which provides ASBA services for SME IPOs. In this case, Axis bank provided an option to apply this IPO. not on SBI and other banks.
Hi Mr.Suresh
Are you planning to invest personally ?
Hi Rajkumar, If this is available on ICICIdirect, i would be investing in it.
With an aim to launch the largest IPO in the small and medium enterprises (SME) space, Momai Apparels is launching an IPO. The stocks will be listed on NSE Emerge and the IPO would be to the tune of Rs 41 crores. Momai Apparels is a subsidiary of Ashapura Intimates Fashion.
The issue, in the price band of Rs 78-90, will be open for subscription from September 25 to 30, 2014. The company has managed to close its pre-IPO placement of Rs 13 crores in two days, with large participation from high net-worth investors and Small Industries Development Bank of India (SIDBI) investing Rs 3 crore. It was priced at Rs 78 a share in the pre-IPO placement. Care has assigned ‘SME Fundamental Grade 4 /5’ to the IPO indicating ‘very good fundamentals’.
Momai Apparels makes intimate garments, such as lounge wear, bridal night wear, honeymoon sets, bathrobes, sportswear and leggings for its parent company Ashapura Intimates Fashion, which operates in the retailing and exports space. It plans to utilise the capital to expand its capacity across the category by setting up a new plant at Vapi in Gujarat.
Momai would also aim for subsidy provided under the Textile Upgradation Fund to build the factory in six to nine months. Last year, the group listed Ashapura Intimates Fashion on the SME platform at Rs 40 a share, which is now trading at Rs 130.
The only trouble is if only someone can give some allocation in good IPOs, have been really unlucky when it comes to allocations 🙁 . I am guessing this too would be hugely oversubscribed , it is in lines with lovable IPO. Looks good and so invest max lets see what happens
Are you going to apply for this IPO ? & as per your recommadation i had applied for sharda corpchem 1 lot and have got 1 lot allotment. Thanks for your suggettion.
Want to know can i sale this after listing or wait for some more day and at what price will have to sale ?
Thanks
Akhilesh
If available on icicidirect, i would invest. I applied for Sharda cropchem ipo but nit recd sungle share. Amt refunded
Thanks Sursh. I never applied in an SME IPO as the minimum investment is very high. is this the same case with this one as well?
Yes carez
Thanks for your valuable recommendations
Hi Suresh,
Will you be applying for this IPO?
Regards,
Vignesh. S
If listed on icicudirect, i would do that
Is it listed in ICICI? not on HDFC 🙁
Thanks Suresh. Based on your recommendation I applied for Sharda Cropchem and have been allotted 90 shares. I think listing is next week. Also, I am to inform you that I am sharing your recommendation on Facebook group Palakkad Gramma Thinnai and Palakkad Iyers Group.
Thanks for the review. The minimum application is 1600 Shares. so the minimum investment is 144000.