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Five Core Electronics NSE SME IPO review (May apply)

Review By Dilip Davda on May 5, 2018

Five Core Electronics Ltd. (FCEL) is engaged in the manufacturing and exports of PA systems. It entered the audio era with innovative products driven by the needs of professional customers reflecting commitment to the industry with the use of advanced technology and techniques in the field of Audio Systems.  FCEL’s focus had been on exports in own brand name – 5CORE. Improved engineering and aggressive marketing made a significant impact on its sales. Today it manufactures and exports whole range of Public Address Systems - Woofers, Amplifiers, Computer Speakers, Personal Speaker System, Headphones and Earphones. In the year 2016-17, it expanded with most modern machines and technology. It has also been trading in fabric. It is exporting its products to over 55 countries. On domestic front, this industry is highly fragmented.

To part finance its working capital, funding of subsidiary, repayment/pre-payment of loans from promoters and general corpus fund needs, FCEL is coming out with a maiden IPO of 3333000 equity shares of Rs. 10 each at a fixed price of Rs. 140 per share to mobilize Rs. 46.66 crore. Issue opens for subscription on 09.05.18 and will close on 11.05.18. Minimum application is to be made for 1000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Issue is jointly lead managed by Sarthi Capital Advisors Pvt. Ltd. and Indian Overseas Bank. Bigshare Services Pvt. Ltd. is the registrar to the issue. Issue constitutes 26.41% of the post issue paid up capital of the company. Having issued initial equity at par, it raised further equity in the price range of Rs. 50 to Rs. 90 per share. Average cost of acquisition of shares by the promoters is Rs. 43.79 and Rs. 50.14 per share. Post issue, its current paid up equity capital of Rs. 9.29 cr. will stand enhanced to Rs. 12.62 cr. Promoters sold 5 lakh shares to Subhkam Properties LLP @ Rs. 126 per share ahead of IPO

On performance front, for last four fiscals, FCEL has (on a consolidated basis) posted turnover/net profits of Rs. 111.80 cr. / Rs. 0.85 cr. (FY14), Rs. 113.49 cr. / Rs. 0.66 cr. (FY15), Rs. 122.94 cr. / Rs. 0.95 cr. (FY16) and Rs. 170.65 cr. / Rs. 1.35 cr. (FY17). For first nine months of FY18 it has earned net profit of Rs. 10.21 cr. on a turnover of Rs. 245.61 cr which is really spectacular and surprising as well. It suffered a setback in bottom lines for FY15. For last three fiscals it has posted an average EPS of Rs. 2.03 and an average RoNW of 4.90%. Issue is priced at a P/BV of 2.2 on the basis of its pre-issue NAV of Rs. 64.50 and at a P/BV of 1.82 on the basis of its post issue NAV of Rs. 76.44. If we annualize latest earnings (which are spectacular one) and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 13. Since it has no listed peers to compare with, it is the first mover in the segment.

On merchant banker’s front, this is the 30th mandate from Sarthi Capital in last four fiscals. Out of last 10 listings, 1 opened at discount to offer price, 2 at par and 8 with a premium ranging from 3.7% to 22.87% on the day of listing. From Indian Overseas Bank, this is the 7th mandate from its stable and out of last 6 listings, 1 opened at a discount to offer price and 5 with a premium ranging from 12.3% to 20% on the day of listing.


Conclusion / Investment Strategy

Based on its track record for Fiscal 14 to 17, it fared with average performances. For first nine months it has posted spectacular performance which raises concern on sustainability. Although company is the first mover in the segment, considering main concern of sustainability of bottom lines as the industry is highly fragmented, investors may consider investment at their own risk.

Review By Dilip Davda on May 5, 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

Five Core Electronics IPO FAQs

  1. 1. Why Five Core Electronics IPO?

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

  2. 2. How is Five Core Electronics IPO?

    Read the Five Core Electronics IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Five Core Electronics IPO what should investors do?

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

  4. 4. Is Five Core Electronics IPO good?

    Our recommendation for Five Core Electronics IPO is to subscribe for long term.

  5. 5. Is Five Core Electronics IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Five Core Electronics IPO.

  6. 6. When will Five Core Electronics IPO allotment status?

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

  7. 7. When will Five Core Electronics IPO list?

    The Five Core Electronics IPO will list on Monday, May 21, 2018, at NSE SME.