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KHFM Hospitality NSE SME IPO review (May apply)

Review By Dilip Davda on Mar 16, 2019


•    KHFM has focused on integrated hospitality & facility management services.
•    IHFM market is expected to post CAGR 16 5o 20% by 2020.
•    Good order book of Rs. 230.31 cr. as on 30.11.18.
•    Based on H1 FY19 earnings issue appears fully priced.

ABOUT COMPANY:
KHFM Hospitality & Facility Management Services Ltd. (KHFM) (erstwhile known as Kalpataru's Hospitality & Facility Management Services Pvt. Ltd.) is engaged in the business of integrated hospitality and facilities management services. The company manages 12 lakhs sq. ft. of Gardening and 30 lakhs sq. ft. Corporate Space on a daily basis, equipped with the latest technology and trained manpower. Having strong clients across BFSI, Aviation, Government Establishments, Municipal Corporations, Retail, Railway, Hospitality, Business Parks, Infrastructure sector, company provides end-to-end outsourced solution & services in the assessment and management of property and facilities. The company has focused on providing integrated hospitality and facility management services (IHFM).

Currently, it operates across 10 states covering 21 cities through a network of site offices with in-house resources over 2,500 people. KHFM's top 5 clients contribute nearly 84% in its order book (Rs. 230.31 cr.) as on 30.11.18.  They include MCGM (Municipal Corporation of Greater Mumbai), ONGC, Indian Railways, Nuclear Power, Patna Sachivalaya. The company has a PAN India presence and enjoys benefits of geographical reach. It also caters Chhatrapati Shivaji International Airport, Sahar-Mumbai, Central Railway, Western Railway, Tata Motors, HDFC Group, Essel World etc.

The impressive client retention ratio of 70% is a testimony to the quality of work and the company's commitment towards customer satisfaction, which would help in acquiring new clients with ease in future.  

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its working capital and general corpus fund needs, KHFM is coming out with a maiden IPO of 2950000 equity shares of Rs. 10 each at a fixed price of Rs.38 per share to mobilize Rs. 11.21 cr. The issue opens for subscription on 22.03.19 and will close on 27.03.19. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Post issue promoter's holding will be around 69.59%. Issue constitutes 30.41% of post issue paid up capital of the company. The issue is solely lead managed by Bonanza Portfolio Ltd. while Bigshare Services Pvt. Ltd. is the registrar to the issue. Nikunj Stock Brokers Ltd. is acting as a market maker for this issue.  Having issued initial equity at par, KHFM raised further equity in the price range of Rs. 85 to Rs. 122.50 per share between March 2007 and September 2012. It has also issued bonus shares in the ratio of 9 shares for every 1 share held in March 2009 and again 9 shares for 1 share held in March 2018. The average cost of acquisition of shares by the promoters is Rs. 2.52 and Rs. 3.01 per share. KHFM's current paid up equity capital of Rs. 6.75 cr. will stand enhanced to Rs.9.70 Cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, KHFM has posted turnover/net profits of Rs. 44.98 cr. / Rs. 1.95 cr. (FY16), Rs. 44.88 cr. / Rs. 1.81 cr. (FY17) and Rs. 45.08 cr. / Rs. 2.22 cr. (FY18). All these years performance is static due to working capital constraints. However, is got banking support that helped it to boost its top and bottom lines for H1 of FY19 for which it earned net profits of Rs. 1.38 cr. on a turnover of Rs. 37.85 cr. Its current debt/equity ratio is 1.39.

For the last three fiscals, KHFM has posted an average EPS of Rs.3.02 and an average RoNW of 12.07%. The issue is priced at a P/BV of 1.30 on the basis of its NAV of Rs. 29.24 as on 30.09.18 and at a P/BV of 1.19 on the basis of its post-issue NAV of Rs.31.90.

If we annualize latest earnings and attribute it on fully diluted post issue equity, then asking price is at a P/E of around 13.33, thus issue appears fully priced.

COMPARE WITH LISTED PEERS:
As per offer documents, it has shown Kaarya Facilities and Rithwik Facility as its listed peers that are currently trading at a P/Es of around 12 and 17 (as on 15.03.19).  

MERCHANT BANKER'S PERFORMANCE:
On merchant banker's front, this is the first mandate from it's stable and has no track records of past listings.


Conclusion / Investment Strategy

Hospitality & Catering, Facility Management and Security Services segment is set to post CAGR of 16% to 20% by 2020 indicating bright prospects for this company. Investors may consider long term investment in this upcoming service sector company.

Review By Dilip Davda on Mar 16, 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. 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

KHFM HOSPITALITY IPO FAQs

  1. 1. Why KHFM HOSPITALITY IPO?

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

  2. 2. How is KHFM HOSPITALITY IPO?

    Read the KHFM HOSPITALITY IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. KHFM HOSPITALITY IPO what should investors do?

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

  4. 4. Is KHFM HOSPITALITY IPO good?

    Our recommendation for KHFM HOSPITALITY IPO is to subscribe for long term.

  5. 5. Is KHFM HOSPITALITY IPO worth Investing?

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

  6. 6. When will KHFM HOSPITALITY IPO allotment status?

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

  7. 7. When will KHFM HOSPITALITY IPO list?

    The KHFM HOSPITALITY IPO will list on Friday, April 12, 2019, at NSE SME.

1 Comments

1. Dilip Davda  Mar 27, 2019 18:53
The issue stands extended till 04th April 2019 with a revised downward price of Rs. 36 per share. With this revised price, the total fund mobilization will be Rs. 10.62 cr.