Bhatia Communications BSE SME IPO Review (Avoid)

Review By Dilip Davda on Feb 6, 2018

Bhatia Communications & Retail (India) Ltd. (BCRL) is engages into retail and whole sell distribution business of mobile handsets, tablets, data-cards, mobile accessories, mobile related products etc. It sells smart mobile handsets of all the brands including Apple I-phone, Samsung, OPPO, GIONE, VIVO etc. under one roof at its owned 72 retail outlets chain and 24 franchisee retail chain dealers in Southern Gujarat region. To offer credit/EMI facilities to its customers, company has tied up with leading credit houses like Bajaj Finserve, Capital First etc. BCRL also provides after sale services for all these products and also enjoys warranty on them from suppliers of such products. Company operates under brand names like “Bhatia Communication, Bhatia Mobile – The mobile One Stop Shop”

To part finance its working capital, general corpus fund needs, BCRL is coming out with a maiden IPO of 1650000 equity shares of Rs. 10 each at a fixed price of Rs.150 per share to mobilize Rs. 24.75 crore. Issue opens for subscription on 08.02.18 and will close on 12.02.18. Issue comprises fresh equity issue of 1400000 shares and offer for sale of 250000 shares. Minimum application is to be made for 1000 shares and in multiples thereon, thereafter.

Issue constitutes 26.37% of post issue paid up capital of the company. Average cost of acquisition of shares by the promoters is Rs. 0.021 and Rs. 30.45 per share.  Issue is solely lead managed by Guiness Corporate Advisors Pvt. Ltd. and Purva Sharegistry (India) Pvt. Ltd. is the registrar to the issue. Post allotment, shares will be listed on BSE SME. It raised initial equity at par and has issued bonus shares in the ratio of 50 for 1 (November 2013), 6 for 1 (September 2017) and 1 for 3 (January 2018. In September 2017 it converted preference shares in equity at a price of Rs. 400 per share. Post issue its current paid up equity capital of Rs.4.86 crore will stand enhanced to Rs. 6.26 cr.

On performance front, BCRL has posted turnover/net profits of Rs. 104.12 cr. / Rs. 0.35 cr. (FY14), Rs. 110.57 cr. / Rs. 0.34 cr. (FY15), Rs. 96.08 cr. / Rs. 0.31 cr. (FY16) and Rs. 133.49cr. / Rs. 0.48 cr. (FY17).  For the first half of current fiscal, it has earned net profits of Rs. 1.31 cr. on a turnover of Rs. 85.24 cr. It suffered a setback in FY 16. Sudden jump in first half top and bottom line is surprising. For last three fiscals it has posted an average EPS of Rs. 7.22 (on pre-bonus equity) and Rs. 0.82 (on post bonus equity) and an average RoNW of 10.09. On post bonus basis, asking price is at a P/E ranging from 153 to 183 and at a P/BV of 11 plus on the basis of its NAV of Rs. 13.34 as on 30.09.17 and at a P/BV of 3.63 on the basis of post issue NAV of Rs. 41.33, thus issue is exorbitantly priced. P/Es of its listed peers are Vmart (75), V2 Retail (90) and Trent (105). If we annualize latest earnings and attribute it on fully diluted post issue equity then asking price is at a P/E of 35 but the sustainability of profitability is a major concern.

On merchant banker’s front, this is the 24th mandate from its stable in last three years. Out of last 10 listings, 2 opened at discount, 2 at par and the rest with a premium of 5% to 20% on the day of listings.


Conclusion / Investment Strategy

Company’s peers are no comparable on an apple to apple basis. It is operation in the highly competitive field with many unorganized players. Considering its exorbitant pricing one may give it a miss.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Feb 6, 2018

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 before making any actual investment decisions, based on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the past, SME IPOs drew the attention of investors across the board. However, as SME issues have entry barriers and continued low preference from the broking community, any reader taking decisions based on any information published here does so entirely at own risk. The above information is based on information available as on date coupled with market perceptions. The Author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda

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 news papers.

Email: dilip_davda@rediffmail.com

Bhatia Communications IPO FAQs

  1. 1. Why Bhatia Communications IPO?

    The initial public offer (IPO) of Bhatia Communications & Retail (India) Limited offers an early investment opportunity in Bhatia Communications & Retail (India) Limited. A stock market investor can buy Bhatia Communications IPO shares by applying in IPO before Bhatia Communications & Retail (India) Limited shares get listed at the stock exchanges. An investor could invest in Bhatia Communications IPO for short term listing gain or a long term.

  2. 2. How is Bhatia Communications IPO?

    Read the Bhatia Communications IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Bhatia Communications IPO what should investors do?

    Bhatia Communications IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Bhatia Communications IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  4. 4. Is Bhatia Communications IPO good?

    Our recommendation for Bhatia Communications IPO is to avoid.

  5. 5. Is Bhatia Communications IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Bhatia Communications IPO.

  6. 6. When will Bhatia Communications IPO allotment status?

    The Bhatia Communications IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit Bhatia Communications IPO allotment status to check.

  7. 7. When will Bhatia Communications IPO list?

    The Bhatia Communications IPO will list on Tuesday, February 20, 2018, at BSE SME.








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