Secondary market continued to bleed on global worries and lack of decisions on reforms in spite of lower IIP numbers for March 2012. Amidst shaky market sentiment while we had two IPOs tapping the market i.e. Plastene India and Monarch Health (SME IPO), one more company is joining the suicidal move when there is a liquidity crunch.
The IPO of Speciality Restaurant Ltd. (SRL) is opening on 16.05.2012 with an issue of 11739415 equity share of Rs. 10 each being offered under book building process within a price band of Rs. 146-155. The issue will close on 18.05.2012. Kotak Mahindra Capital Co. Ltd. is the sole BRLM for this issue and Link Intime India Pvt. Ltd is the registrar to the issue. CRISIL has assigned IPO Grade 4 to this IPO indicating strong fundamentals of the company. Post issue shares will be listed on BSE and NSE. Minimum application is to be made for 40 shares and in multiples thereof for retail category.
With this float company hopes to mobilize around Rs. Rs. 171.40 - 181.96 Crore (based on lower and upper price band) crore to part finance its expansion plans for development of new corporate Restaurants and Food Plaza along with repayment of high cost debt and general corporate corpus.
The company is currently having 69 restaurants and 13 confectioneries in 21 cities and having ten brands that include Mainland China, Sigaree, Oh! Calcatta, Machaan, Sweet Bengal Mostly Kabab, Just Biriyani, Haka, Flame & Grill and offers its guests an affordable fine dining experience with quality food and service in a modern ambience.
The food services industry is becoming an increasingly important segment of India's economy. According to survey by global analysts, the size of the Indian Food Industry estimated at 200 bn US$ in the year 2006-07 & is estimated to reach 300 bn US$ by 2015. In spite of the current meltdown in the Indian economy, the food services industry in India is expected to remain one of the fastest growing industries in the Asia Pacific. The food services industry comprises two distinct market segments: the organized segment comprising 10.7% of the total industry & unorganized segment comprising of roadside eateries.
Company follows "Franchises owned, company operated outlet model", which allows optimize capital for growth. On performance front, the company has posted restated net profit of Rs. 6.31 crore, Rs. 11.19 crore, Rs. 15.63 crore and Rs. 224.57 million, respectively translating into an basic EPS of 2.21, 3.92 & 5.48 as on March 31st 2009, 2010 & 2011 respectively. For the first nine months of the current fiscal EPS stands at Rs. 5.20 (not annualized). As on that date NAV stands at Rs. 38.14. With additions to its capacity, the management is confident of maintaining the tempo of growth.
As far as BRLM's track record is concerned, as intimated by them out of 13 IPOs they managed (jointly or severally), 3 IPOs failed to give listing gains. (As per Chittorgarh web data, it is 13 out of 38 IPOs failed to give gains on debut day.)
As claimed by the issuers that there are no listed peer group in pure terms, PE ratio comparison is not done, however, based on current earnings attribution on enhanced equity, it is coming at around 34 PE and around 4 P/BV which looks aggressive in present terms of the market.
Remarks: In context of ongoing situation in secondary/primary market and new listing norms coupled with low ebb of investor's confidence, this issue can be termed as High Risk-High Yield bet.
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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