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Kushal Tradelink Ltd IPO Review (Avoid)

Review By Dilip Davda on Aug 12, 2013

While there are two BSE SME IPOs currently on for subscription, we have yet another surprised announcement of an IPO for BSE SME listing. Details of the same are as under:

Kushal Tradelink (KTL) is Gujarat-based company operating as a trader of natural paper. The company is one of the leading wholesalers in Ahmedabad, Gujarat. It purchases paper from the paper mills and supplies it to various customers like newspaper agencies, packaging product businesses etc. The company's core business comprises of products such as Kraft paper, Duplex board and waste paper. It also deals in news print paper and reel core & copier paper.

The company currently has three stocking facilities located in Ahmedabad, Gujarat, with certain processing facilities like sheet-cutting, rewinding, bailing, reel to sheet making etc. The KTL group consists of Kushal Infrastructure and Ashapura Paper Mills. 

To part finance its proposed expansion of paper unit and setting up of a new corporate office and meet other general corpus fund, the company is coming out with an IPO of 7928000 equity share of Rs. 10 each with a fixed price of Rs. 35 per share to mobilize Rs. 27.75 crore. The issue opens for subscription on 14.08.13 and will close on 21.08.13. Minimum application is to be made for 4000 shares and in multiples thereof, thereafter. Issue is lead managed by Aryaman Financial Services Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Post allotment the shares will be listed on BSE SME. The issue and the net issue constitutes of 33.41% and 31.69% of the post-issue paid-up equity share capital respectively.

On the financial front, the company posted average EPS of Rs. 1.77 for last three fiscals. For the year 2012-13 it earned net profit of Rs. 4.09 crore on a turnover of Rs. 246.10 crore and if we attribute this earnings on expanded equity of Rs. 23.73 crore post this issue it amounts to an EPS of Rs. 1.72 and on this basis the asking price is at a P/E of 20+ and on the NAV of Rs. 13.23 as on 31.3.13, it is at a P/BV of 2.65 and thus is an expensive offer. Its trading business has thin margin which may diminish going forward as the direct supply from paper manufacturing will give tough competition. In April 2009 it issued bonus shares in the ratio of 11 for 1 and in August 2011 in the ratio of 8 for 10 and thus its equity rose to Rs. 15.80 crore before IPO. This will further rise to Rs. 23.73 post issue.

 On merchant banker’s front, it has poor track record and credibility in the market. Since 2010-11, it has brought 7 IPOs which have poor performance track record.

 


Conclusion / Investment Strategy

Remark: It is better to “SKIP” this issue.

 

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Aug 12, 2013

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

Kushal Tradelink IPO FAQs

  1. 1. Why Kushal Tradelink IPO?

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

  2. 2. How is Kushal Tradelink IPO?

    Read the Kushal Tradelink IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Kushal Tradelink IPO what should investors do?

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

  4. 4. Is Kushal Tradelink IPO good?

    Our recommendation for Kushal Tradelink IPO is to avoid.

  5. 5. Is Kushal Tradelink IPO worth Investing?

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

  6. 6. When will Kushal Tradelink IPO allotment status?

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

  7. 7. When will Kushal Tradelink IPO list?

    The Kushal Tradelink IPO will list on Wednesday, September 4, 2013, at BSE SME.