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Monday, July 23, 2012

Sangam Advisor Limited (SAL) IPO Review



    (A)   Issue Highlights

(1)    Face Value: Rs. 10
(2)    Issue Type: Fixed Price Issue
(3)    Issue Period: 24/7/12-26/7/12
(4)    Price: Rs. 22
(5)    Issue Size: Rs. 5.07 crore/23,04,000 Equity Shares
(6)    Listing: BSE-SME Platform
(7)    Market Lot: 6,000 Equity Shares


     (B)   Company profile

SAL is the diversified financial solution provider company and primarily caters the needs of SMEs (Small & Medium Enterprises). Other services offered by the company are corporate advisory and investment services for SMEs. Its clientele includes names like Haldiram group and Mukund group. The company claims itself to be one-stop shop for SMEs.
More than 50 % of the revenue is derived from the advisory business.


     (C)   Concerns

·         SAL still doesn’t hold an NBFC license
·         the Top 5 clients account for 64 % of the fee-based revenue
·         Post-issue promoter holding shall  be brought down to 31 % and that shall make the  company vulnerable to hostile takeovers.

     (D)   Objects of the issue

·         Investment in listed and unlisted securities and financial products: Rs.4.5 crore
·         issue expenses: Rs. 42 lakh
·         general corporate purposes: 9.88 lakh




     (E)    Financial  analysis  #
#
·         Post issue equity used for the calculations

Parameter
FY 12
P/E ratio
60.9
ROE
5.1 %
NPM(net profit margin)
31 %
M-cap/Sales
19.1
Net Asset per share
Rs. 7


       (F)    comparison with the peers  ##

Parameters
P/E
NPM
ROE
SAL
60.9
31%
5.1%
Future Capital Holdings 
10.61
23.15% (FY 11)
8.1% (FY 11)
Ratnabali Capital Markets ltd.
9.51
1.16%
6.8%
Nalwa Sons Investment
22.95
83.8% (FY 11)
NA

##
·         Peer data as per moneycontrol site
·         FY 12 data unless mentioned otherwise

    (G)  Inference

This issue is highly priced as evident from its ‘price to earnings’ ratio,asset per share and the peer comparison. Besides, the majority of income comes from the advisory service and this issue has been floated to raise the funds for investment in equity.
SAL has incurred the trading loss in the past and lacks a proven track record in the same.
 ‘Income from operations’ was negative in past few years. Stupendous income and net profit growth in FY 12 also raises concerns.
Listing gains in such issues  occurs due to operator manipulation and not due to underlying value.
 There is no sense in investing in this issue and value investors better skip this issue.

PS: This stock shall be listed on BSE SME exchange and unless your broker provides BSE SME platform you shall not be able to sell these shares.

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