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SRG Housing Finance Ltd IPO Review (Avoid)

While secondary market is at its recent higher resistance level, we are still missing main line IPOs and have to settle with some SME platform issues that are in command of primary market for a while. This week we have one more BSE SME platform IPO from SRG Housing Finance Ltd. (SRGHF) Details of the same are as under:

SRGHF is the flagship company of SRG group of Rajasthan and is engaged in housing finance segment and offers loans to individuals for buying a house and also in funding against property. The company is having Rajasthan centric operations and hopes to raise its loan book in coming years. To part finance this object, the company is offering 3504000 equity share of Rs. 10 each at a fixed price of Rs. 20 per share (i.e. at a premium of Rs. 10 per share) to mobilize Rs. 7.01 crore. The issue is opening for subscription on 22.08.12 and will close on 24.8.12. Minimum application is to be made for 6000 shares and in multiples thereof. Aryaman Financial Services Ltd. is the lead manager and Sharex Dynamic (I) Pvt. Ltd is the registrar to the issue.

Company's current equity base of Rs. 4.58 crore (post 1 for 2 bonus issue in April 2012-mainly out of premiums collected from preferential issues to promoters in recent past)  will rise to Rs. 8.08 crore post this issue. For the year 2011-12 it posted a net profit of Rs. 0.26 crore on a total income of Rs. 1.27 crore. Last three year's average EPS of Rs. 0.97 on pre-bonus equity. This may get further diluted on enhanced equity post bonus and this issue and thus offer price works out to be at a P/E of around 61 and thus is aggressively priced. Lead Manager has poor track records on performance of IPOs managed by it.


Conclusion / Investment Strategy

As SME IPOs have unaffordable entry level for subscription point as well as post listing they are not really meant for retail masses. Risks aver HNI's may dare to lock their funds for long term rewards.

Review By Dilip Davda on Aug 21, 2012

The SRG Housing Finance IPO Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered IPO Analysts tells you if SRG Housing Finance IPO worth investing. The SRG Housing Finance IPO Note sets the IPO expectations in systematic way which tells you if SRG Housing Finance IPO good to buy (good or bad / yes or no). The IPO Forecast tells you weather to invest in SRG Housing Finance IPO by providing IPO recommendations i.e. subscribe, avoid and neutral.

Review Author

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. With entry barriers, SEBI wants only well informed investors to participate is such offers. With crazy recent listings, SME IPOs have started drawing attention of investors across the board. However, as SME issues have entry barriers and continued 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, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in new papers.

Email: dilip_davda@rediffmail.com


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