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East India Securities BSE SME IPO review (May apply)

Review By Dilip Davda on Mar 1, 2018


East India Securities Ltd. (EISL) is currently engaged in the business of Broking (Equity and Equity Derivatives, Currency and Commodity Derivatives). It is one of the largest Clearing Member for Equity Derivatives in NSE, and Currency Derivatives in NSE/MCX/USE in Eastern India. EISL also provide services as a Depository Participant (NSDL/CDSL); Distributor (Mutual Funds, Primary Issuer of Equity and Fixed Income Securities); and play an Advisory role in Corporate Financing and Risk Management. Company is  a member of the: Capital Market segment of NSE of India since 1995; Equity Derivates segment of NSE since 2000; Currency Derivates segment of NSE since 2008; Capital Market segment of BSE since 2005; Equity Derivatives segment of BSE since 2006. EISL enjoys distinction of executing the first ever Exchange Traded Index Option contract as well as Future Contract on individual stock futures and also have the distinction of executing the first Currency Future contracts and Currency Options contract on NSE at launch. Company also has the membership of NSDL since 1997, and CDSL since 2000 and has received permanent registration from SEBI as Participant of the NSDL and CDSL depositories in the year 2015. Its clients include Public/Private Banks, Insurance companies, Domestic Mutual Funds, AIFs and FPIs.

To explore visibility and brand as well as listing and liquidity, EISL is coming out with a maiden IPO of 1008000 equity shares of Rs. 10 each at a fixed price of Rs. 920 per share to mobilize Rs. 92.74 crore. Entire issue is secondary i.e. by way of offer for sale by the existing stakeholders. Issue opens for subscription on 05.03.18 and will close on 07.03.18. Minimum application is to be made for 160 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue constitutes 27.49% of the post issue paid up capital of the company. Average cost of acquisition of shares by the promoters is Rs. 10 and Rs. 10.27 per share. Issue is solely lead managed by Finshore Management Services Ltd. and Cameo Corporate Services Ltd. is the registrar to the issue. Having issued initial equity at par, it raised further equity at a price of Rs. 30 per share. Post issue EISL’s paid up equity remains same at Rs. 3.68 cr. It is worthwhile to note that this is the biggest SME IPO so far in the history.

On performance front, EISL has posted revenue/net profits of Rs. 37.13 cr. / Rs. 15.88 cr. (FY14), Rs. 40.13 cr. / Rs. 14.98 cr. (FY15), Rs. 33.49 c.r / Rs. 15.86 cr. (FY16) and Rs. 44.50 cr. / Rs. 27.74 cr. (FY17). For first nine months of the current fiscal it has earned net profit of Rs. 28.27 cr. on revenue of Rs. 41.08 cr.  Jump in revenues and net profits for FY17 and 3Qs of FY18 a bit surprising. For last three fiscals it has posted an average EPS of Rs. 59.04 and an average RoNW of 8.74%. Issue is priced at a P/BV of 1.17 based on its NAV of Rs. 789.14 as on 31.12.17. If we annualize latest earnings and attribute it on post issue equity, then asking price is at a P/E of around 9 against its (as per offer documents)  listed peers trading at 41 (Geojit Financial), 11 (Abhinav Capital), 45 (Aditya Birla Money) as on 01.03.18. Thus issue appears reasonably priced.  However, other peers like Indo Thai, Bharat Bhushan are trading at a P/E of around 6 and 12.

On merchant banker’s front, this is the first mandate from its stable and has no track record.


Conclusion / Investment Strategy

This is the biggest SME IPO in the history so far. Company has posted surprising performance for last twenty one months. Promoters are selling over 27% stake that has average cost of acquisition of Rs. 10 and Rs. 10.27 per share. It appears issue is aggressively priced considering NAV due to non-capitalized reserves. Another surprise is while other companies are coming with IPO either with September 17 or December 2017 performance, this company has given performance till 20.01.18 of the current fiscal. Merchant banker has no track record. Considering all these, investors may consider investment at their own risk.

Review By Dilip Davda on Mar 1, 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

East India Securities IPO FAQs

  1. 1. Why East India Securities IPO?

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

  2. 2. How is East India Securities IPO?

    Read the East India Securities IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. East India Securities IPO what should investors do?

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

  4. 4. Is East India Securities IPO good?

    Our recommendation for East India Securities IPO is to subscribe for long term.

  5. 5. Is East India Securities IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the East India Securities IPO.

  6. 6. When will East India Securities IPO allotment status?

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

  7. 7. When will East India Securities IPO list?

    The East India Securities IPO will list on Tuesday, March 13, 2018, at BSE SME.

1 Comments

1. Anupam Ghosh  Mar 5, 2018 12:09:15 PM
From the prospectus, it appears that financials have been submitted for Dec 2017 and 20.1.18 is the date of auditor certification

Indo Thai and Bharat Bhushan are much smaller than East India Securities. From the prospectus, the consistent annual tax payments point out to the genuinity of the profits.

Looks like promoters have left a reasonable amount on the table by offering it at very reasonable valuations of around 1.2 times book and PE of 12. Promoters continued holding of 74% looks like a positive