Shankara Building Products IPO review (Subscribe)

Review By Dilip Davda on Mar 15, 2017

Shankara Building Products Ltd (SBPL) is one of the leading organized retailers of home improvement and building products in India based on number of stores, operating under the trade name Shankara BuildPro. As on December 31, 2016, it operated 103 Shankara BuildPro stores spread across 9 states and 1 union territory in India. SBPL caters to a large customer base across various end-user segments in urban and semi-urban markets through its multi-channel sales approach, processing facilities, supply chain and logistics capabilities.

Company’s retail operations are strategically suited to benefit from growth in housing demand, large market for home improvement, and increasing customer involvement in home solution decisions which have created a need for organized speciality home improvement and building product stores. Its growth is further driven by company’s ability to make available an assortment of quality products under a trusted corporate brand built over two decades. Its staff creates awareness about products and applications, and guide customers’ purchase decisions. The company also provide delivery and facilitate installation services for select product categories. Thus it serves home owners, professional customers (such as architects and contractors), and small enterprises, through its retail stores. Additionally, in the semi urban markets, SBPL also cater to specific agricultural requirements of individual customers and small enterprises. Under retail operations, it offers a comprehensive range of products at its stores, including structural steel, cement, TMT bars, hollow blocks, pipes and tubes, roofing solutions, welding accessories, primers, solar heaters, plumbing, tiles, sanitary ware, water tanks, plywood, kitchen sinks, lighting and other allied products.

SBPL carry reputed third party brands such as Johnson, Sintex, Uttam Galva, Uttam Value, Futura, APL Apollo, Astral Pipes and Alstone and its own brands such as CenturyRoof, Ganga and Loha at its retail stores. Thus its revenue comprises of retail as well as enterprise sells. Company’s enterprise sales caters primarily to large end-users, contractors, and OEMs, while the channel sales caters to dealers and other retailers through its extensive branch network. As on December 31, 2016, it had 11 processing facilities having a total installed capacity of 323,200 MTPA operating at an average capacity utilization of 93.81% (annualized). In January 2017, SBPL commenced production at its stainless steel pipes and tubes processing facility in Jigani, Bengaluru which has an installed capacity of 1,200 MTPA. These capacities can be scaled in a modular manner as per requirement. To cater to its customers, the company also have a robust logistics network which, as of December 31, 2016, consisted of 56 warehouses (29 operated by theCompany, 23 operated by TVSPPL and 4 operated by CRIPL) aggregating 0.59 million sq. ft., and a fleet of 44 owned trucks to augment last mile delivery. A large part of its warehousing backbone is owned which ensures stability of operations. It also helps in catering to the requirements of company’s retail outlets.

To part finance its prepayment of loans and general corpus fund needs, the company is coming out with a maiden IPO of 7500000 equity share of Rs. 10 each via book building route with a price band of Rs. 440-460 to mobilize Rs.331.96 to 345 crore on the basis of lower and upper price bands. Issue consists of fresh equity issue worth Rs. 45 crore (approx 978260 shares at the higher price band) and offer for sale of 6521740 equity shares. Issue opens for subscription on 22.03.17 and will close on 24.03.17. Minimum application is to be made for 32 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. BRLMs to the issue are IDFC Bank Ltd, Equirus Capital Pvt Ltd and HDFC Bank Ltd. Karvy Computershare Pvt Ltd it the registrar to the issue. From 1995 to 2003 it issued initial equity at par. From 2007 to 2013 it issued equity in a price range of Rs. 105 to 120 and a bonus issue in the ratio of 2.1 for 1 share in November 2007. Post issue its current paid up equity capital of Rs. 21.87 crore will stand enhanced to Rs. 22.85 crore.

On performance front, the company has posted turnover/net profits of Rs. 1766.89 cr. / Rs. 31.83 cr. (FY13), Rs. 1927.93 cr. / Rs. 28.71 cr. (FY14), Rs. 1979.67 cr. / Rs. 22.58 cr. (FY15) and Rs. 2036.58 cr. / Rs. 41.33 cr. (FY16). For nine months ended on 31.12.16 of the current fiscal, it has earned net profit of Rs. 41.55 crore on a turnover of Rs. 1709.89 crore. Although its top line surged, it suffered set back in bottom line for FY 14 and FY 15 because of its capex for expansion with borrowed funds that escalated its depreciation and interest provisions. If we annualize latest earnings and attribute it to fully diluted equity post issue then asking price is at a P/E of around 18 plus and P/BV of 3 plus. It has no listed peers to compare with.

On BRLM’s front, the handled four public issues in past three years out of which two issues closed below the offer price on the listing date.

Conclusion: The Company is set to attract investors as a first mover in the segment. Price appears to be reasonable considering the business model. Investors may consider investment for medium to long term.


Conclusion / Investment Strategy

The Company is set to attract investors as a first mover in the segment. Price appears to be reasonable considering the business model. Investors may consider investment for medium to long term.

Reviewer recommends Subscribing to the issue.

Review By Dilip Davda on Mar 15, 2017

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

Shankara Buildpro IPO FAQs

  1. 1. Why Shankara Buildpro IPO?

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

  2. 2. How is Shankara Buildpro IPO?

    Read the Shankara Buildpro IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Shankara Buildpro IPO what should investors do?

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

  4. 4. Is Shankara Buildpro IPO good?

    Our recommendation for Shankara Buildpro IPO is to subscribe.

  5. 5. Is Shankara Buildpro IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe to the Shankara Buildpro IPO.

  6. 6. When will Shankara Buildpro IPO allotment status?

    The Shankara Buildpro IPO allotment status will be available on or around Mar 30, 2017. The allotted shares will be credited in demat account by Apr 3, 2017. Visit Shankara Buildpro IPO allotment status to check.

  7. 7. When will Shankara Buildpro IPO list?

    The Shankara Buildpro IPO will list on Wednesday, April 5, 2017, at BSE, NSE.

8 Comments

umang patel
8. umang patel  Apr 4, 2017 00:59
this is good company for longtime investment .
NARESH M PATEL
7. NARESH M PATEL  Apr 2, 2017 19:59
allotment date for ipo
NARESH M PATEL
6. NARESH M PATEL  Apr 2, 2017 19:45
pl infirm to regarding allotment for I P O
Donesh
5. Donesh  Mar 22, 2017 16:16
Low margin business from psydy , unknown & unproven promotor.so be careful,as business is trading business which is generally considered as non accretive in nature.Apply at ur own risk as margin of safety is N pt visible.On the contrary ,I suggest to apply for cl educate ipo.it may give handsome returns.
Anky
5.1. Anky  Mar 31, 2017 21:49
Bhai ne fasaya sabko. jo duba usko consider karne ko keh raha he,ab jo bhagege us se dekh kar royga yeh
Ankit Shah
4. Ankit Shah  Mar 22, 2017 11:51
Nice Ipo relly to profitable..... Ignore any reason shankara building products relly gerat market is good not issue profit dum sour








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