Olympic Cards Ltd. (OCL) is a 50 year old company and currently enjoying Numero Uno status in south in Wedding cards segment. It has over 53% of its total revenue coming from Wedding cards business and rest from Greeting Cards, Envelopes, Calendars, Business Cards, Notebooks etc.
Now the company is setting up a new state of the art unit for Wedding Cards manufacturing and also mulls setting up of own retail outlets and appointing franchises. To part finance the said programmer, the company is offering equity share of Rs. 10 each within a price band of Rs. 30-32 to mobilize Rs. 25 crore. From this, approximately Rs. 20 crore will go for new unit, Rs. 3 crore for enhancing its own retail outlets to 10 from 6 and the rest for other corpus funds. Issue opens for subscription on 09.03.2012 and will close on 13.03.2012. Minimum application is to be made for 200 shares and in multiples thereof thereafter. The issue is lead managed by Ashika Capital Ltd. And registrar to the issue is Cameo Corporate Services Ltd. CRISIL has assigned "IPO Grade 1" to this offer indicating at poor fundamentals of the company. Post issue the shares will be listed only on BSE. This issue represents around 48% dilution of the enhanced equity.
As far as sole BRLM is concerned, out of four IPOs it brought in the past only 2 IPOs managed to reward investors on the debut day. Thus the ratio of success is very poor. Despite this, greed for aggressive pricing is still adhere too.
OCL has posted an average EPS of Rs. 2 for past three years. For the first nine months of the current fiscal it has earned net profit of Rs. 1.93 crore on a turnover of Rs. 32.73 crore. These translate into a P/E of 20 plus on the fully diluted equity post this issue. Although the company claims that the peer industry that are trading at and around 10 P/E are not falling in line of production that OCL has, still aggressive pricing of the IPO makes it a bet only for the risk aver investors to park moderate funds for listing gains, if any.
DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. As SME issues have entry barriers and having low preference from broking community, any reader taking decisions based on any information published here does so entirely at own risk. Above information is based on information available as on date coupled with market perceptions. Author has no plans to invest in this offer.
(SEBI registered Research Analyst-Mumbai).
About Dilip Davda
Dilip Davda (SEBI registered Research Analyst-Mumbai), a freelance journalist for more than 25 years, is a stock market analyst and news article writer. Since 1985, he has contributed to print media, electronic media and often appears on TV channels as visiting stock analyst. His articles are regularly publishes in Corporate India, Smart Investment (English and Gujarati weekly published from Ahmedabad), Free Press Journal and many other news papers & magazines. He is also a visiting stock analyst on DD News TV Channel.
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