Rajasthan based SRG Securities Finance is coming out of public issue for 25.08 Lakh shares of face value of Rs 10 each at premium of Rs 10 for fixed price of Rs 20 per share. SRG Securities Finance IPO would hit market on 7-Oct-13. Should you subscribe to SRG Securities Finance IPO?
About SRG Securities Finance
SRG Securities Ltd is Rajasthan based SRG Securities Finance is a Non-Banking Financial Company (NBFC) registered with the RBI. The company has a presence in Rajasthan and other adjoining areas. It provides loans in three segments – equipment finance, vehicle finance and business finance. SRG Securities Finance IPO would be listed in BSE SME platform.
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Issue details of SRG Securities Finance IPO
- IPO opens: 7-Oct-2013
- IPO closes: 14-Oct-2013
- Face value: Rs 10
- Issue price: Rs 20
- Minimum bid: 6,000 shares and in multiples of 6,000 shares thereon
- Minimum investment: Rs 120,000
- Lead managers: Aryaman Financial Services Ltd
- Listing: BSE SME
- Prospectus: http://www.moneycontrol.com/news_html_files/pdffiles/sep2013/SRG_Securities.pdf
Purpose of the IPO: The funds would be used for the following purposes.
- To augment our capital base and provide for our fund requirements for increasing our operational scale with respect to our NBFC activities and
- To meet Issue related Expenses.
- Company revenues have grown from Rs 46.20 Lakhs for year ended Mar-2009 to Rs 107.99 Lakhs for the year ended Mar-2013.
- Coming to profits, company has posted a margin of 10.65% for year ended Mar-2009 and 14.14% for the year ended Mar-2013.
Reasons to invest SRG Securities Finance IPO
- CAGR (growth) in revenue for 18% and 24% in profits in last 5 years
Reasons not to invest in SRG Securities Finance IPO
- No brand recognition in the market.
- Touch competition as there are large players.
- The SME IPO’s listed are trading with very low volume and the liquidity has been a problem.
- The minimum investment required is Rs 1.20 lakhs.
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Recommendation / Investment strategy: Average EPS for the last 3 years is Rs 0.91. The EPS for the year ended Mar-2013 is Rs 1.12. Company runs on small revenues and margins. SRG Securities Finance NAV as on 31-Mar-2013 is Rs 17.62. Post this issue, the NAV would get reduced to Rs 17.09. This translates to 8x P/E ratio. Its competitors like Magma Fincorp and Sundaram Finance EPS are Rs 5.6 and Rs 35.80 as against SRG Securities Finance EPS of RS 1.12 for FY 2012-13. Considering some of these negative points and stiff competition my suggestion to investors is to stay away from such IPO.
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SRG Securities Finance IPO
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Thanks for explaining. Your way of explanation is really great.
What is EPS & P/E ratio. You regularly mention these terms while discussing about IPO. Please explain it.
One more thing, can you explain, what is non-banking financial companies? If possible, please write an article for the same.
Mohit, Banks and financial companies deal with financing, loans etc., Companies which generaly do not do banking business, but provide financing, loans etc. are NBFC’s. e.g. SRG securities provides financiing and loans. HDFC banking also provides financing and loans. But HDFC Bank is bank where one can open a account and do banking transactions. But not in SRG Securities.
Mohit. EPS Refers to Earnings per share. This indicates that how much money your each share is earning. P/E Ratio is price to earnings ratio. Means how many times of share price you are paying based on earnings. These two are good ratios to compare with competitors whether the share price is under priced or over priced.