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Relicab Cable Manufacturing BSE SME IPO review (Avoid)

Review By Dilip Davda on Mar 4, 2016

Relicac Cable Manufacturing Ltd (RCM) is engaged in the business of manufacturing and marketing of PVC Compounds and Wires and Cables and has successfully developed a wide base of business network and marked its presence in this industry since over 15 years. RCM is involved in manufacturing a complete array of wires and cables that are used in diverse sectors encompassing virtually all industries like telecom, electrical, automotive and household appliances and the new field of wind energy. Its product range includes a wide range of wires and cables including armored / unarmored and single core as well as multi core flexible cables, control & power cables, instrumentation cables etc. using high quality copper wires in HR, FR, FRLS, ZHFR forms and other raw materials. It has as part of its backward integration initiative; an in-house PVC Compound manufacturing facility which supplies compound raw material for Wires and Cables manufacturing business as well as being sold directly as finished goods to other users of PVC Compound. RCM offers all types of PVC Compounds 

To part finance its Technological modifications and certain augmentations in the factory, Long Term Working Capital, Refundable Security Deposit for Factory Premises and meeting General Corporate funds requirement, the company is coming out with a maiden IPO for 1608000 equity share of Rs. 10 each at a fixed price of Rs. 20 per share to mobilize Rs. 3.22 crore. Issue opens for subscription on 09.03.16 and will close on 14.03.16. Minimum application is to be made for 6000 shares and in multiples thereon, thereafter. Issue is lead managed by Aryaman Financial Services Ltd and Sharex Dynamic India Pvt Ltd is the registrar to the issue. Post allotment, shares will be listed on BSE SME.

On performance front, the company has posted an average EPS of Rs. 0.76 for last three fiscals. Its turnover has seen declining trends from FY 2012 to FY 2014 and has been static for FY 2015. Its bottom line has seen erratic movements with ups and down for these years. To be precise its turnover and net profits from FY 2011 to FY 2015 were Rs. 15.65 cr./Rs. 0.04 cr., Rs. 15.84 cr./Rs. 0.07 cr., Rs. 12.02 cr. / Rs. 0.03 cr., Rs. 11.15 cr. / Rs. 0.06 cr. and Rs. 11.94 cr. / Rs. 0.14 cr. Sudden surge in bottom line for FY 2015 is surprising. For first half of current fiscal it has earned net profit of Rs. 0.08 crore on a turnover of Rs. 7.30 crore. If we annualize these earnings and attribute on fully diluted equity post IPO then asking price is at a P/E of 57 and P/BV of around 2. P/E is very high compared to industry average of 20.

Since inception till March 2015 it has issued all equity shares at par value and a bonus in the ratio of 24 shares for every 100 shares. Cost of acquisition by promoters is around Rs. 9 per share. Its current paid up equity capital of Rs. 2.97 crore will stand enhanced to Rs. 4.58 crore post this issue.

On merchant banker’s front, it has poor track records. This is the 12th IPO from their stable.


Conclusion / Investment Strategy

Issue is priced aggressively and the track record is not supporting. There is no harm in giving it a miss.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Mar 4, 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 prior to making any actual investment decisions, based on information published here. With entry barriers, SEBI wants only well informed investors to participate is such offers. With crazy recent listings, SME IPOs have started drawing attention of investors across the board. However, as SME issues have entry barriers and continued low preference from broking community, any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on information available as on date coupled with market perceptions. Author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

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

The Relicab Cable IPO Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered IPO Analysts tells you if Relicab Cable IPO worth investing. The Relicab Cable IPO Note sets the IPO expectations in systematic way which tells you if Relicab Cable IPO good to buy (good or bad / yes or no). The IPO Forecast tells you weather to invest in Relicab Cable IPO by providing IPO recommendations i.e. subscribe, avoid and neutral.


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