SPS Finquest SME IPO – Should you invest?

SPS Finquest SME IPOSPS Finquest Limited is coming up with an IPO to issue 33.44 Lakhs of shares @ Rs 75 per share aggregating to Rs 25.08 Crores. This NBFC company has been growing year on year. This SPS Finquest IPO has several positive points along with a  few negative points. Should you invest in an SPS Finquest IPO? Do you think that your money could multiply in the next few years by investing in this SPS Finquest SME IPO?

About SPS Finquest Limited

SPS Finquest is a NBFC registered company with an RBI. It operates as a Non Deposit taking Non-Banking Finance Company engaged primarily in the business of advancing loans for investing/trading in securities. This company provides its shareholders with the opportunity to participate in the field of financing against equities and other financial instruments that provides a decent return on the capital deployed.

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Issue details of SPS Finquest IPO

  • IPO opens: 21-May-2014
  • IPO closes: 23-May-2014
  • Face value: Rs 10 per share
  • Issue price: Rs 75
  • Minimum bid: 1600 shares and multiples of 1600 shares thereon
  • Minimum investment: Rs 120,000
  • Listing: BSE  SME platform
  • Lead Managers: Networth Stock Broking Limited
  • Download SPS Finquest IPO Prospectus here

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

  • To augment capital base and repay existing high interest debt
  • To meet issue related expenses

Company Financials

  • The company has posted revenue of Rs 2.15 Lakhs for the year ended Mar-2009 and Rs 787 Lakhs for the year ended Mar-2013. First 9 months of this financial (FY 2013-14) it year made a revenue of Rs 598 Lakhs.
  • The company has posted a profit of Rs 38,205 for the year ended Mar-09 Vs profit of Rs 36 Lakhs for the year ended Mar-2013. First 9 months of this financial year (FY 2013-14) it made a profit of Rs 42.68 Lakhs.

SPS Finquest SME IPO-Financials

Reasons to invest in SPS Finquest IPO

  • Good revenue growth in last 4-5 years.
  • Good profit growth in the last few years
  • The company intends the issue proceeds of Rs 25 Crores to be repaid to the debt for single company named Shri Shapoor Mistry (shareholder) for Rs 24.73 Crores. This company has given this loan @ 11% interest. Means SPS Finquest is making Rs 2.47 Crores as interest on such loan every year. If this is repaid, the interest burden would be reduced and this amount would be straight away moving as profit. This would be a good move for the company to reduce debt.

Reasons not to invest in SPS Finquest IPO

  • Highly dependable on promoter performance.
  • NBFC companies face defaults and non payment would impact profits.
  • Loans held by the company are short term in nature which carries high interest rates.
  • Revenue would be highly volatile due to business nature.
  • The company posted a profit of Rs 36 Lakhs in FY 2012-13 which is 66% lower than FY 2011-12 profit.
  • Face intense competitions in the business which may limit the growth

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Recommendation / Investment strategy:

  • EPS for the financial year ended Mar-2013 is Rs 9.36. Based on last financial year EPS of Rs 9.36, P/E ratio works out to be 8. This company has issued bonus shares to promoters and post bonus issue, P/E Ratio would be 24.11. The P/E ratio of its competitors BCB Finance Limited is 29.19 (Highest) and First Leasing Limited is 2.99 (Lowest). Hence the issue price is on the higher side.
  • Though company has been growing, considering all negative points and high issue price, I would advice investors to stay away from this IPO.

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SPS Finquest SME IPO

Suresh KP


  1. Hi Suresh,
    One off track question -My father is having shares in Hindalco from last 30 yrs. Should he keep it for some more time or sell it?

  2. I had never invested in any IPO. So, I would like to ask one question.  My question may look silly as I don't have any idea about investing directly in share market.

    I had read aprrox. all your analysis about SME-IPO. I found one thing common in all. Their profit % is quite low, less than 10% for any FY. For this SME-IPO, if I had purchased share worth 1.2 Lakhs & company had posted a porfit of 10%, then profit will be just 12,000 per year i.e. 1K/month. So, what's great in investing in share market as we get better returns in Mutual Funds & in some cases, in FD? 

    Even, there was one SME-IPO, something Biotech, you had recommended investors to invest in that IPO as it was great and at the same time, there were several other IPOs that you had recommended but profit % was far lower. Why did you recommended everyone to invest in those IPOs. I am sure that apart from profit%, there is something else that you consider before buying shares. So, what is that & why you had recommended those IPOs whose profit% are below 10%?

    1. Mohit, Your understanding is wrong. I am not saying appreciation of share value. I am talking about what company is earning. If you invest Rs 1 lakh in IPO, company would use such proceeds for future growth or repaying debt. The profits are the turn-over / revenue of the company. Low profit means, high risk as they vanish anytime. Stable or high profits are indication that company is doing good and can sustain its performance.

  3. Suresh KP, Thanks for your valuable suggestions. Really these kind of analysis helps many investors like me.

    I appreciate for your excellent analysis on all the financial queries without any bias. Thank you.




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