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Veto Switchgears and Cables Ltd IPO Review (Avoid)

Review By Dilip Davda on Nov 25, 2012

The first IPO of Thejo Engineering that came with Book Building process for listing on NSE SME EMERGE platform with a grade of IPO 5/5 failed to live up to confidence for which the Call-Auction mode is largely responsible as per seasoned operators. Now we have second IPO for listing on NSE EMERGE from Veto Switchgears, details for the same is as under:

Veto Switchgears & Cables Ltd. (VSCL) is manufacturer of Wires & Cables and Electrical Accessories. The company is promoted by Gurnani group. It produces all type and ranges of Electrical Accessories. It uses latest production technology and also produces latest products as per market demand. Its products are with the brand name 'VETO' and 'VIMAL POWER' India's first ISI Mark Electrical Accessories. VSCL enjoys good market share of electrical accessories in Northern region and has pan India market. Currently it has two manufacturing units at Mumbai and Haridwar. It has well established marketing network for all these products.

To modernize Haridwar Unit and step up brand building exercise along with general corpus fund raising plans it mulls a public issue of Rs. 25 crore. The issue is opening on 03.12.12 and will close on 05.12.12. Price Band for the offer is kept at Rs. 48-50 and minimum application is to be made for 3000 shares and in multiples thereof thereafter. Issue is graded as SME 4/5 by CRISIL indicating superior fundamentals compared to other SMEs in India. Issue is lead managed by Keynote Corporate Services Ltd jointly with Indian Overseas Bank and Bigshare Services Pvt Ltd is acting as registrar to the offer.

As far as Lead Manager's track records are concerned Keynote Corporate had 17 mandates for IPOs so far out of which 9 IPOs gave listing gains and Indian Overseas Bank has 1 mandate that failed to give listing gains.

On VSCL's performance part, it has shown average performance for last three years with an average EPS of Rs. 11.97 and NAV of Rs. 50 plus on old equity base prior to Bonus issue in the ratio of 1 for 1 in May 2012.  With infusion of fresh capital post offer, the equity will stand at Rs. 15.80 crore and if we attribute this to indicated earnings, the offer looks aggressively priced at a P/E of around 10.


Conclusion / Investment Strategy

This looks appealing against listed entities( in similar field but are not peers in clear terms) that are quoting at a P/E of 20 plus But considering the fate of Call Auction on NSE SME, this issue may fail to live up to confidence. So better buy at discount post listing instead of applying for it in IPO.

Correction on 27th Nov 2012 By Dilip Davda

Today Veto Switchgear, the company from Rajasthan and having main base at Jaipur with 70% volume in and around Rajasthan did IPO Road Show in Mumbai and I got the opportunity to meet promoters and merchant bankers.

They clarified that they will be listing Veto on NSE SME - EMERGE under Normal Market mode and hence there is no question of re-run of history that happened for Thejo due to listing under Call Auction mode and thus Veto might have some listing gain for investors.

Due to this I am changing my review on this IPO from Avoid to HNI's can take a risk for modest investment for listing gains, if any.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Nov 25, 2012

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

Veto Switchgears IPO FAQs

  1. 1. Why Veto Switchgears IPO?

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

  2. 2. How is Veto Switchgears IPO?

    Read the Veto Switchgears IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Veto Switchgears IPO what should investors do?

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

  4. 4. Is Veto Switchgears IPO good?

    Our recommendation for Veto Switchgears IPO is to avoid.

  5. 5. Is Veto Switchgears IPO worth Investing?

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

  6. 6. When will Veto Switchgears IPO allotment status?

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

  7. 7. When will Veto Switchgears IPO list?

    The Veto Switchgears IPO will list on Monday, February 13, 2012, at NSE SME.
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