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Khemani Distributors BSE SME IPO Review (Avoid)

Review By Dilip Davda on Mar 12, 2016

Khemani Distributors & Marketing Ltd (KDM) is engaged in the business of trading in FMCG products of Hindustan Unilever Limited (“HUL”) as a 'Redistribution Stockist’ in Surat, Gujarat. Its product portfolio includes (a) personal care products; (b) home care products; and (c) food and drinks products. KDM primarily caters to the retailers and wholesalers of Surat wherein it supply the above range of HUL FMCG products. Currently, it is catering to approximately 3,500 retailers and wholesalers located in Surat. KDM also keeps investing and dealing in securities, in such manner, as it deems fit for the attainment of its main objects.

Initially, in the year 2011 the Company was involved in the business of distributorship of mobile handsets with one of the mobile manufacturers for the territories of Surat district, Tapi district, Navsari district, Silvassa, Daman, Umargaon, Pardi, Dharampur and Valsad town. However, it discontinued the said business in the year 2012.

To repay its high cost debt, generate corpus funds and working capital, the company is coming out with a maiden IPO of 1584000 equity share of Rs. 10 each at a fixed price of Rs. 100 per share to mobilize Rs. 15.84 crore. Issue opens for subscription on 16.03.16 and will close on 18.03.16. Minimum application is to be made for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME.  Issue is lead managed by Choice Capital Advisors Pvt Ltd and Bigshare Services Pvt Ltd is the registrar to the issue.

On performance front, for last two fiscals it has posted turnover and net profit of Rs. 51.41 cr. /Rs. 0.12 cr. (FY14) and Rs. 68.82 cr. / Rs.7.34 cr. (FT15). Sudden jump in net profit is due to other income of Rs. 9.30 cr. For eight months ended 30.11.15 it has earned net profit of Rs. 0.05 cr. on a turnover of Rs. 47.87 cr. If we annualize and attribute these earnings on fully diluted equity post IPO then asking price is at a P/E of 588 which indicates exorbitant pricing.  After initial equity issue at par, it issued equity shares at a price of Rs. 2010 (on Rs. 10 paid up basis) and also issued bonus shares in the ratio of 14 shares for every 1 share held. Its current paid up equity capital of RS. 4.16 crore will stand enhanced to Rs. 5.74 crore post IPO.

On merchant banker’s front, this is the third IPO from its stable and earlier two mandates have failed to bring rewards post listing.


Conclusion / Investment Strategy

Performance of the company does not match the asking price. Exorbitant pricing makes this issue a high risk, no reward bet. Investors may give it a miss.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Mar 12, 2016

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

Khemani Distributors IPO FAQs

  1. 1. Why Khemani Distributors IPO?

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

  2. 2. How is Khemani Distributors IPO?

    Read the Khemani Distributors IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Khemani Distributors IPO what should investors do?

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

  4. 4. Is Khemani Distributors IPO good?

    Our recommendation for Khemani Distributors IPO is to avoid.

  5. 5. Is Khemani Distributors IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Khemani Distributors IPO.

  6. 6. When will Khemani Distributors IPO allotment status?

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

  7. 7. When will Khemani Distributors IPO list?

    The Khemani Distributors IPO will list on Wednesday, March 30, 2016, at BSE SME.