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Galactico Corporate BSE SME IPO review (May apply)

Review By Dilip Davda on September 20, 2019

•    GCSL is a diversified financial services provider company.
•    Announced robust performance on a consolidated basis.
•    Currently, the financial service sector is in doldrums, raising concern.
•    Merchant Banker has average track records.

Galactico Corporate Services Ltd. (GCSL) is a diversified financial services company in India, carrying out the business of management of fundraising activities, investment advisory, underwriting of issues, manager, consultant or adviser to any issue including corporate advisory services and as consultant or adviser. The company is registered as SEBI Category-I Merchant Banker. GCSL is primarily focused on providing such services to small and midsized enterprises (SMEs). As on 17th September 2019, it had 9 employees on its payroll.

To part finance its plans for repayment of unsecured loans (Rs. 0.50 cr.) and general corpus fund (Rs. 0.08 cr.) needs,  GCSL is coming out with a maiden IPO of 1608000 equity shares of Rs. 10 each at a fixed price of Rs. 23 per share to mobilize Rs. 3.70 cr. It comprises fresh equity issue of 300000 shares (Rs. 0.69 cr.) and offer for sale of 1308000 shares (Rs. 3.01 cr.).  The issue opens for subscription on 24.09.19 and will close on 27.09.19. Minimum application is to be made for 6000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue constitutes 28.06% of the post issue paid-up capital of the company.
The issue is solely lead managed by Aryaman Financial Services Ltd. while Bigshare Services Pvt. Ltd. is the registrar to the issue. Aryaman Capital Markets Ltd. is the market maker for this issue. Having issued initial equity at par, it issued further equity at a price of Rs. 2375 per share from September 2016 to March 2018 and has also issued bonus shares in the ratio of 64 for 1 in March 2018. GCSL is spending Rs. 0.31 cr. (includes Rs. 0.11 cr. for a fresh issue) to mobilize the issue proceeds.
The average cost of acquisition of shares by the promoters is Rs. 10.37 per share.
Post issue, GCSL's current paid-up equity capital of Rs. 5.43 cr. will stand enhanced to Rs. 5.73

On the financial performance front, for the last two fiscals, GCSL has (on a consolidated basis) posted turnover/net profits of Rs. 16.54 cr. / Rs. 1.35 cr. (FY18), Rs. 19.19 cr. / Rs. 1.42 cr. (FY19) ON a standalone basis it posted turnover/net profits of Rs. 0.52 cr. / Rs. 0.32 cr. (FY17), Rs. 1.60 cr. / Rs. 0.85 cr. (FY18) and Rs. 1.97 cr. / Rs. 0.74 cr. (FY19). For the last three fiscals on the standalone basis, it has posted an average EPS of 1.31 and an average RoNW of 6.23%, while for last two fiscals on a consolidated basis it has posted an average EPS of Rs. 2.09 and an average RoNW of 7.65%. The issue is priced at a P/BV of 1.02 on the basis of standalone NAV of Rs. 22.64 (as on 31.3.19) and post issue NAV of Rs. 22.66. On a consolidated basis, the issue is priced at a P/BV of 0.82 on its NAV of Rs. 28.03 as on 31.03.19 and at a P/BV of 0.83 on the basis of post-issue NAV of Rs. 27.77. If we consider consolidated earnings for FY19and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 9.3. Thus issue appears fully priced.
As per offer documents, GCSLL has shown Keynote Financial and Navigant Corporate as its listed peers. They are currently quoting at a P/Es of around 8 and 10 (as on 19.09.19 closing). However, they are not strictly comparable on an apple to apple basis.
On merchant banker's front, this is the 35th mandate from its stable in the last three fiscals (including the ongoing fiscal). Out of the last 10 listings, 2 opened at discount and the rest with a premium ranging from 0.09% to 1.92%. Thus it has poor track records so far.

Conclusion / Investment Strategy

GCSL is a company from Vipul Rathi group that planned an IPO of Seven Hills Beverages in August 2017 but withdrew it on the day of opening for some technical internal matters. Now the group is coming out with a company in the financial services sector that is currently in the doldrums. The issue is fully priced based on super consolidated performance, cash surplus risk savvy investors may consider investment at their own risk.

Review By Dilip Davda on September 20, 2019

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. My reviews do not cover GMP market and operators game plans. Readers must consult a qualified financial advisor before making any actual investment decisions, based the on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the recent past, SME IPOs drew the attention of investors across the board and lead to seer madness. 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 their own risk. The above information is based on information available as of date coupled with market perceptions. The Author has no plans to invest in this offer.

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.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: ).

Galactico IPO FAQs

  1. 1. Why Galactico IPO?

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  4. 4. Is Galactico IPO good?

    Our recommendation for Galactico IPO is to subscribe for long term.

  5. 5. Is Galactico IPO worth Investing?

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

  6. 6. When will Galactico IPO allotment status?

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

  7. 7. When will Galactico IPO list?

    The Galactico IPO will list on Wednesday, October 9, 2019, at BSE SME.