Satkar Finlease IPO – Avoid
Delhi based Satkar Finlease is coming out of public issue for 75.04 Lakh shares of face value of Rs 10 each at premium of Rs 8 for fixed price of Rs 18 per share. Satkar Finlease IPO would hit market on 25-Sep-13. Should we subscribe to Satkar Finlease IPO or not?
About Satkar Finlease
Satkar Finlease Ltd is Delhi based Non-Banking-Finance Company focusing in providing intercompany loans, personal loans, loans against shares and securities, loans against properties, trade finance, bill discounting, trading in shares and securities and arbitrage business in stocks and commodities market. Satkar Finlease IPO would be listed in BSE SME platform.
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Issue details of Satkar Finlease IPO
- IPO opens: 25-Sep-2013
- IPO closes: 27-Sep-2013
- Face value: Rs 10
- Issue price: Rs 18
- Minimum bid: 8,000 shares and in multiples of 8,000 shares thereon
- Minimum investment: Rs 144,000
- Lead managers: Guiness Corporate Advisors Private Ltd
- Listing: BSE SME
- Prospectus: http://www.bseindia.com/downloads/ipo/Prospectus-Satkar.pdf
Purpose of the IPO: The funds would be used for the following purposes.
- Boost Operations for NBFC Activities
- Brand building and promotional activities
- General Corporate purposes
- Company revenues have grown from Rs 0.02 Lakhs for year ended Mar-2009 to Rs 61.13 Lakhs for the year ended Mar-2013.
- Coming to profits, company has posted negative margin of -800% for year ended Mar-2009 and 18.42% for the year ended Mar-2013.
Reasons to invest Satkar Finlease IPO
Reasons not to invest in Satkar Finlease IPO
- Company runs into low business. The revenues 5 years back is only Rs 2,000 and currently for Mar-13 ended revenues are only Rs 61 Lakhs.
- Company generated Rs 11 Lakhs profits in last financial year. Such small margins can be generated by any small company.
- Such SME company performance can turn negative as the company runs on low revenue and profits.
- The SME IPO’s listed are trading with very low volume and the liquidity has been a problem.
- The minimum investment required is Rs 1.44 lakhs.
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Recommendation / Investment strategy: Average EPS for the last 3 years is Rs 0.22. The EPS for the year ended Mar-2013 is Rs 0.35. Company runs on low revenues and margins. Satkar Finlease NAV as on 31-Mar-2013 is Rs 65. Post this issue, the NAV would get reduced to Rs 19.54. Diluted EPS post this issue would be Rs 0.01. This translates to 1800 P/E ratio. Its competitors like Sundaram Finance EPS are Rs 35.80 and IKF Finance is Rs 2.40. Considering all these negative points, my suggestion to investors is to stay away from Satkar Finlease IPO.
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Satkar Finlease IPO
Thanks Suresh for this article.