Godha Cabcon NSE SME IPO review (Others)

Review By Dilip Davda on Apr 21, 2018

Godha Cabcon & Insulation Ltd. (GCIL) is one of the leading manufacturers of ACSR/AAAC/AAC Conductors in the State of Madhya Pradesh at Indore and have latest machines having best technology. The company is all set to continue its growth momentum with higher installed capacity and good order book position. The prospects are even brighter in view of future procurement plan of state electricity companies. GCIL is also targeting Power Grid Corporation of India Limited to bring its products at national level. It was a proprietary concern till July 2017 and thereafter taken over by the company. It has installed capacity of 15000 MTPA.

To part finance its working capital and general corpus fund needs, GCIL is coming out with a maiden IPO of 3000000 equity shares of Rs. 10 each via book building route with a price band of Rs. 30 – Rs. 33 to mobilize Rs. 9.00 to Rs. 9.90 crore (based on lower and upper price bands). Issue opens for subscription on 27.04.18 and will close on 03.05.18. Minimum application is to be made for 4000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Issue is solely lead managed by Mark Corporate Advisors Pvt. Ltd. and Karvy Computershare Pvt. Ltd. is the registrar to the issue. Issue constitutes 27.03% of the post issue paid up capital of the company. After raising initial equity at par, it raised further equity at a price of Rs.30 per share. Average cost of acquisition of shares by the promoters is Rs. 10.00, Rs. 15.05 and Rs. 29.58 per share.  Post issue its current paid up equity capital of Rs. 8.10 crore will stand enhanced to Rs. 11.10 crore.

On performance front, as a proprietary concern it has posted turnover/net profits of Rs. 16.81 cr. / Rs. 0.15 cr. (FY15), Rs. 44.11 cr. / Rs.0.68 cr. (FY16) and Rs. 74.37 cr. / Rs. 1.37 cr. (FY17). For FY18 for the two broken periods ended on 15.07.17 it has posted net profit of Rs. 0.77 cr. on a turnover of Rs. 21.62 crore and then net profit of Rs. 0.93 cr. on a turnover of Rs. 21.23 cr. for period ended 31.10.17. Its paid up equity of Rs. 0.02 cr. as on 31.03.17 increased to Rs. 5.89 crore as on 31.10.17. GCIL has posted an average EPS of Rs. 1.44 for last nineteen months with a negative RoNW.  Issue is priced at a P/BV of 2.14 at the upper price band on the basis of its NAV of Rs. 15.42 as on 31.10.17. If we combine two broken periods and annualize the working and attribute it on fully diluted post issue equity, then asking price is at a P/E of around 12 but then sustainability of bottom line is in question. As per offer documents it is showing APAR Ind as its listed peer that is trading at a P/E of around 20 (as on 20.04.18.). On the working scale basis both are not comparable in true sense.  Based on FY 17 earnings, asking price is at a P/E of 26 plus.

On merchant banker’s front, this is the 3rd mandate from its stable and last 2 issues opened at a premium ranging from 6% to 12.78% on the day of listing.


Conclusion / Investment Strategy

Broken FY18 workings with higher profits are bit surprising as it leads to attractive P/E. Cash surplus risk savvy investors may consider moderate investment for long tern at their own risk.

Review By Dilip Davda on Apr 21, 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

Godha Cabcon Insulation IPO FAQs

  1. 1. Why Godha Cabcon Insulation IPO?

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

  2. 2. How is Godha Cabcon Insulation IPO?

    Read the Godha Cabcon Insulation IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Godha Cabcon Insulation IPO what should investors do?

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

  4. 4. Is Godha Cabcon Insulation IPO good?

    Sorry, we didn't rate the Godha Cabcon Insulation IPO.

  5. 5. Is Godha Cabcon Insulation IPO worth Investing?

    Our lead analyst Mr. Dilip Davda didn't rate the Godha Cabcon Insulation IPO.

  6. 6. When will Godha Cabcon Insulation IPO allotment status?

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

  7. 7. When will Godha Cabcon Insulation IPO list?

    The Godha Cabcon Insulation IPO will list on Friday, May 11, 2018, at NSE SME.

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