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Scotts Garments Ltd IPO Review (Avoid)

Review By Dilip Davda on Apr 17, 2013

After the news of SEBI clearance for IPO of Just Dial, primary market operators were eagerly waiting for the official announcement and pricing details of the said IPO, but with a great surprise to all, we have the announcement from Scotts Garments Ltd, that is taking the onus of being the first main line IPO for the fiscal 2013-14. Details of the Scotts Garment IPO are as under:

Scotts Garments Ltd. (SGL) is a garment manufacturing company in India having state of the art facilities for manufacturing of high quality fashion garments mainly for global markets. Its facility is fully backed by product development, design studio, and efficient sampling infrastructure supported by facilities like embroidery, printing, dyeing and washing. Its list of international clients includes Best Seller-Denmark, Old Navy, H & M -USA, C & A Buying -Germany, Vila A/s- Denmark, Rhodi Suppliers - UK etc. Its manufacturing capacity as on 31.03.12 was 217.08 lakh pieces per month and has windmill power generation capacities of 4.05 MW in southern region. For last three fiscals its exports contributed above 91% in the total turnover.

The company is now planning to set up Trouser manufacturing unit at Doddabalapaur in Karnataka and Knitting and Fabric Processing unit at Kolhapur in Maharashtra. To part finance this along with raising general corpus fund and working capital, it is offering 10506954 equity share of Rs. 10 each via book building process and fixed a price band of Rs. 130-132 to mobilize around Rs. 136 crore. Company has reserved 450000 equity shares for its employees and has also made pre-IPO placement of 1739130 equity share at a price of Rs. 115 per share on 26.12.12. It issued bonus in the ratio of 12 for 1 on 28.03.2006 and during 2007-2009 issued equity shares in different price bands ranging between Rs. 20 to Rs. 80 per share.

Issue opens for subscription on 25.04.13 and will close on 29.04.13. Minimum application is to be made for 100 shares and in multiples thereof thereafter. Shares will be listed on BSE and NSE post allotments. BRLM to the issue are Keynote Corporate Services Ltd. and Canara Bank. Link Intime India is the registrar to the issue. CARE has assigned IPO Grade 3 to this IPO indicating at average fundamentals of the company.

For the fiscals 2010-2011 and 2012 respectively the company reported total turnover of Rs. 434.36 crore, 503.75 crore and 566.13 crore (including other income of Rs. 4.19 crore, 8.47 crore and 65.88 crore) with a net profit of Rs. 27.84 crore, Rs. 34.93 crore and Rs. 84.03 crore. Thus fiscal 2012 witnessed quantum jumps with higher other income. For the first seven months ended 31.10.12 it has posted turnover of Rs. 335.33 crore with a net profit of Rs. 20.41 crore. If we attribute this earning on annualized basis on post IPO Company's equity of Rs. 38.98 crore then the asking price is at a P/E of around 14.5 and at a P/BV of 1.4 plus considering its NAV of Rs. 90.98. Thus is appears to be aggressively priced against its peers that are trading at a P/E of 10 to 16.

On BRLM's performance front, Keynote Corporate had mandate for 17 IPOs out of which 8 failed to give listing day gains. For Canara Bank this is perhaps first mandate after very long.

 


Conclusion / Investment Strategy

Although garment industry is poised for bright prospects ahead as per recent budget, considering listing in "T "group for initial period, it is better to buy at discount post listing.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Apr 17, 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. Any reader taking decisions based on any information published here does so entirely at its own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The 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

Scotts Garments IPO FAQs

  1. 1. Why Scotts Garments IPO?

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

  2. 2. How is Scotts Garments IPO?

    Read the Scotts Garments IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Scotts Garments IPO what should investors do?

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

  4. 4. Is Scotts Garments IPO good?

    Our recommendation for Scotts Garments IPO is to avoid.

  5. 5. Is Scotts Garments IPO worth Investing?

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

  6. 6. When will Scotts Garments IPO allotment status?

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

  7. 7. When will Scotts Garments IPO list?

    The Scotts Garments IPO list date is not yet available. The Scotts Garments IPO is planned to list on [.], at BSE, NSE.