Chemtech Industrial Valves Ltd IPO Review (Avoid)

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Review By Dilip Davda on Jan 10, 2014

The beginning of the CY 2014 for primary market is also marked by BSE SME IPO. Chemtech Industrial Valves Ltd is coming out with an issue of Rs. 7.43 crore. Details of the same are as under:

Chemtech Industrial Valves Ltd. (CIVL) is engaged in the business of manufacturing carbon steel and stainless steel industrial valves of various types & sizes ranging from 15mm up to 4000mm. It manufactures and supplies various types of ball, butterfly, globe, gate and check valves and has a significant customer base in the steel industry. CIVL also supplies its products to customers in the oil and gas (including petro-chemical) industry, infrastructure (including pipelines), process industries (including pharmaceuticals, chemicals, intermediaries and fertilizers), nuclear space and defense industry.

CIVL has planned to acquire additional plant and machinery for its existing facility at Vadvali and funding interiors of corporate office along with raising corpus fund to the tune of Rs. 8.47 crore. To part finance this projects, the company is offering 4952000 equity share of Rs. 10 each at a fixed price of Rs. 15 per share to mobilize Rs. 7.43 crore. The issue opens for subscription on 15.01.14 and closes on 17001.14. Minimum application is to be made for 8000 shares and in multiples thereof, thereafter. The issue is lead managed by Choice Capital Advisors Pvt. Ltd. and Bigshare Services India Pvt. Ltd. is the registrar to the issue. Post allotment, shares will be listed on BSE SME. In March 2013 it issued 50000 shares at a price of Rs. 200 per share and then issued bonus shares in the ratio of 6 for 1 in June 2013 and also made preferential issue of equity at a price of Rs. 15 per share. This enhanced the equity to Rs. 6.51 crore that will rise to Rs. 11.47 crore post issue.

On performance front, the company posted an average EPS of Rs. 1.69 .for last three fiscals and for first seven months ended 30.11.13  of the current fiscal it posted net profit of Rs. 0.07 crore on a turnover of Rs. 25.75 crore. If we attribute this earning on annualized basis on fully diluted equity post issue then EPS stands at Rs. 0.10 and thus asking price is at a P/E of 150.

This is the first mandate of the merchant banker with no track record.

Conclusion / Investment Strategy

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 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

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