The IPO of SKS Micro Finance Limited over subscribed to the extent of 10.51 times. This is largely due to subscription received from QIBs, which was in excess of 20 times the shares reserved for the category. Retail portion was subscribed only to the extent of 16% of the shares reserved.
SOURCE - NSE WEBSITE.
Friday, July 30, 2010
FPO - EIL FINAL TALLY 13.36 TIMES.
The FPO of EIL was subscribed to the extent of 13.36times on the last day. This is largely due to heavy subscription received from QIBs, about 23 times the shares reserved for the category. The retail portion was subscribed to the extent of 2.99 times.
SOURCE- NSE WEB SITE.
SOURCE- NSE WEB SITE.
FORTH COMING IPO
NAME OF THE COMPANY | A2Z Maintenance & Engineering Services Limited |
BUSINESS | Engineering, procurement and construction - providing services to the power transmission and distribution sector. |
PROMOTERS | AMIT MITTAL. |
ISSUE SIZE | RS 750 cr |
Premium/ FV | - |
BRLM | IDFC Capital, DSP Merrill Lynch, Enam Securities and ICICI Securities. |
OBJECTS | To fund investment in three biomass (bagasse)-based power generation projects of 15 MW each. Investment in five biomass-based power generation projects of 15 MW each in the State of Investment in Subsidiaries. Repayment of a loan taken from L&T Infrastructure Finance |
Thursday, July 29, 2010
MFIs can't bring about financial inclusion: Chakrabarty
As published in ECONOMIC TIMES ON 3 Jun 2010
Microfinance institutions will not be able to bring financial inclusion. Their cost of lending is high, Reserve Bank of India Deputy Governor K C Chakrabarty told reporters here on the sidelines of the inauguration of Bank of India's mobile-based remittance facility for urban financial inclusion.
"The definition of financial inclusion is providing access to appropriate financial products and services to the most vulnerable group of the society in a fair, transparent and cost-effective manner by the mainstream financial institutions," he said.
When banks reach that level, the competition will bring down the cost, he said.
"When financial inclusion happens, banks will replace microfinance institutions. Then microfinance institutions will take the role of money lenders," he said.
TAKE AN INFORMED DECISION SKS MICRO IPO.
Microfinance institutions will not be able to bring financial inclusion. Their cost of lending is high, Reserve Bank of India Deputy Governor K C Chakrabarty told reporters here on the sidelines of the inauguration of Bank of India's mobile-based remittance facility for urban financial inclusion.
"The definition of financial inclusion is providing access to appropriate financial products and services to the most vulnerable group of the society in a fair, transparent and cost-effective manner by the mainstream financial institutions," he said.
When banks reach that level, the competition will bring down the cost, he said.
"When financial inclusion happens, banks will replace microfinance institutions. Then microfinance institutions will take the role of money lenders," he said.
TAKE AN INFORMED DECISION SKS MICRO IPO.
Wednesday, July 28, 2010
SKS MICRO IPO: LOAN TO PROMOTER AT 0% AND TO THE POOR AROUND 30%P.A. SKS WAY OF FIGHTING POVERTY.
The company advanced an interest free loan amounting to Rs 16.36 million to its promoter Vikram Akula in 2007, where as it is charging usurious rate on money lent to the poor, down trodden and other unfortunate sections of the society.
READ FULL ARTICLE IN TODAY’S ECONOMIC TIMES.
SEARCH THIS BLOG FOR OTHER ARTICLES ON SKS MICRO IPO.
FORTHCOMING -IPO
NAME OF THE COMPANY | SRS LIMITED |
BUSINESS | Cinema exhibition, Food and beverages, Retail,Jewellery |
PROMOTERS | Dr. Anil Jindal and associates |
ISSUE SIZE | 35,00,00,000 equity shares of Rs10 FV |
Premium/ FV | - |
BRLM | KARVY, IDBI, SPA MERCHANT BANKERS |
OBJECTS | For setting of Cinema halls,retail,food and beverages and jewellery stores |
IPO ANALYSIS: BAJAJ CORP LIMITED - TRUST WORTHY- INVEST.
The Shishir Bajaj group company is entering the capital market on 02-08-10 with public issue of 45,00,000 equity shares of Rs 5/- each in the price band of Rs 630-690. The issue will close on 05-08-10. Kotak Mahindra Capital Company Limited are the sole BRLM.
The ‘Bajaj’ brand has more than five decades of history and has been associated with product categories like two-wheelers, FMCG, financial services and other consumer products. It enjoys a strong brand recall both in the rural and urban markets. The demerger of the Bajaj Group continues to allow all the involved parties to use the ‘Bajaj’ brand.
Bajaj Corp primarily operates in only one business line - hair oils. Oral care forms a very small part of the overall business. The oldest brand is Bajaj Brahmi Amla, in existence since 1953. The other brands include Bajaj Amla Shikakai, Bajaj Jasmine Hair Oil and Bajaj Kala Dant Manjan. Bajaj Corp is the third largest producer of hair oils and the largest producer of light hair oils.
Bajaj Corp derives majority of its revenues from a single product, Bajaj Almond Drops. It is value-added light hair oil and commands a premium. Bajaj Almond Drops is the market leader in the light hair oil segment with a 50% market share.
OBJECTS OF THE ISSUE:
The company intends to utilize the funds for product promotion, acquisition and for general corporate purposes.
FINANCIALS:
In 9MFY10, the company’s net revenues were Rs 2.08.cr and PAT margin was at 27.2%.
PRODUCTS:
Bajaj Corp manufactures and markets five major brands. The flagship brand, Bajaj Almond Drops, is the market leader in the light hair oil segment with 50% market share. Other product includes Bajaj Brahmi Amla, Bajaj Amla Shikakai and Bajaj Jasmine Hair Oil and oral care products under the brand name Bajaj Kala Dant Manjan.
STRENGTHS:
• Market leader in light hair oil segment with 50% market share.
• Strong brand equity - known for reliability, quality and competitive price.
• Established distribution net work.
• Experienced, efficient and professional management.
• IPO grade - 4 by CRISIL.
RISKS:
• The company depends heavily on ‘Almond Drops’. Almond Drops hair oil contributed 92.0% and 92.7% of the total sales and gross profit, respectively, for the nine month period ended Dec -09.
• The company operates in a highly competitive FMCG market.
VALUATION AND RECOMMENDATIONS.
The EPS for the FY10 is Rs 33.57. At the higher end of the price band, the P/E is around 20 times. Compares favorably with other established FMCG players like Colgate (30 PE), Dabur India (38 PE) and Hindustan Unilever (27 PE). A sure winner from the Bajaj stable. There is every thing in the company that an investor looking for. Grab it. IPO investment opportunity of the year. INVEST
SKS MICRO IPO: LOAN TO PROMOTER AT 0% AND TO THE POOR AROUND 30%P.A. SKS WAY OF FIGHTING POVERTY.
The company advanced an interest free loan amounting to Rs 16.36 million to its promoter Vikram Akula in 2007, where as, it is charging usurious rate on money lent to the poor, down trodden and other unfortunate sections of the society.
READ FULL ARTICLE IN TODAY’S ECONOMIC TIMES.
SEARCH THIS BLOG FOR OTHER ARTICLES ON SKS MICRO IPO.
READ FULL ARTICLE IN TODAY’S ECONOMIC TIMES.
SEARCH THIS BLOG FOR OTHER ARTICLES ON SKS MICRO IPO.
Tuesday, July 27, 2010
IPO INVESTING: SKS MICRO FINANCE - OUT OF THE TOP TEN WORST PERFORMING IPOS OF 2010, THREE WERE CO-MANAGED BY KOTAK MAHINDRA CAPITAL, WHO ARE ONE OF THE BRLM TO SKS.
Name | Issue price | Current price | BRLMS |
1. D B Realty | Rs 468 | Rs384 | Kotak,Enam |
2. HATHWAY CABLES | Rs 240 | Rs182 | Kotak,Enam,Morgan Stanely |
3. NITESH ESTATES | Rs 54 | Rs 38 | Kotak, Enam, ICICI Securities |
Monday, July 26, 2010
IPO – SKS MICRO FINANCE LIMITED- UNREALISTIC PREMIUM - AVOID.
The company has fixed the price band at Rs 850-985 for the IPO, which is slated to open on 28-07-10. SKS Micro is proposing to issue 1,67,91,579 Equity Shares of Rs. 10 FV, including the offer for sale of 93,46,256 shares.
SKS Micro earned a net profit of Rs 173.95cr for FY10. On the post issue capital of Rs 71.97cr, the EPS comes to around Rs20/- At the upper price band, the company is demanding a valuation of almost 50 times its FY 10 earnings. For an NBFC, which has limited period of history and no dividend track record, the valuation is very very much stressed.
APART FROM IRRATIONAL PRICING, CONSIDER THE FOLLOWING BEFORE TAKING THE INVESTMENT DECISION:
1. Unethical business: The Company is charging interest around 40% p.a. on money lent to the poor and down trodden.
2. Unsustainable business model: The business model will not sustain in the long -run.
3. No commitment from the promoters: SKS’s founder and chairman sold his shares to Tree Line Asia Master Fund (Singapore) Pte for $12.9 million in Feb. this year.
4. Look at the salary of top executives :
Suresh Gurumani - Managing Director of the Company. The total monthly salary is Rs. 12, 50,000. In addition to the above, Mr. Suresh Gurumani was paid onetime bonus of Rs. 10,000,000, in April 2009.
Dr. Vikram Akula - chairman Rs 70.00 lacs p.a. In addition, ESOP amounting to Rs10.97lacs, totaling Rs 1.79cr p.a.
The irony is they are trying to eradicate poverty.
5. Mohd. Yunus says - “I get very worried when investment funds come to microfinance,” said the founder of Bangladesh’s Grameen Bank, which pioneered the industry by giving small loans to rural women to start their own businesses. “I don’t want to excite businessmen that there is profit to be made here,”
6. The IPO will make the promoters, and other venture capitalists including some P/E funds that have stakes in these companies’ millionaires. The hapless borrowers continue to live in abject poverty.
7. Government /RBI will not be mute spectators to the exploitation.
They are bound to regulate the segment. This will make the business un- attractive.
8. Financial inclusion initiatives taken by the public sector banks/government will marginalize the micro finance business. Do not buy the theories put forth by the BRLMs to sell the issue.
9. The average cost of acquisition of shares by promoters is less than Rs50/-
10. The Andhra Pradesh government has constituted district level ‘Task Force Committees’ (TFCs) to investigate the unethical practices of micro finance institutions in the state. The committees were constituted after the government received many complaints against the loan shark practices adopted by some leading MFI’s of the state.
RECOMMENDATIONS: CLEAR NO.
Search this blog for other articles on Sks micro
SKS Micro earned a net profit of Rs 173.95cr for FY10. On the post issue capital of Rs 71.97cr, the EPS comes to around Rs20/- At the upper price band, the company is demanding a valuation of almost 50 times its FY 10 earnings. For an NBFC, which has limited period of history and no dividend track record, the valuation is very very much stressed.
APART FROM IRRATIONAL PRICING, CONSIDER THE FOLLOWING BEFORE TAKING THE INVESTMENT DECISION:
1. Unethical business: The Company is charging interest around 40% p.a. on money lent to the poor and down trodden.
2. Unsustainable business model: The business model will not sustain in the long -run.
3. No commitment from the promoters: SKS’s founder and chairman sold his shares to Tree Line Asia Master Fund (Singapore) Pte for $12.9 million in Feb. this year.
4. Look at the salary of top executives :
Suresh Gurumani - Managing Director of the Company. The total monthly salary is Rs. 12, 50,000. In addition to the above, Mr. Suresh Gurumani was paid onetime bonus of Rs. 10,000,000, in April 2009.
Dr. Vikram Akula - chairman Rs 70.00 lacs p.a. In addition, ESOP amounting to Rs10.97lacs, totaling Rs 1.79cr p.a.
The irony is they are trying to eradicate poverty.
5. Mohd. Yunus says - “I get very worried when investment funds come to microfinance,” said the founder of Bangladesh’s Grameen Bank, which pioneered the industry by giving small loans to rural women to start their own businesses. “I don’t want to excite businessmen that there is profit to be made here,”
6. The IPO will make the promoters, and other venture capitalists including some P/E funds that have stakes in these companies’ millionaires. The hapless borrowers continue to live in abject poverty.
7. Government /RBI will not be mute spectators to the exploitation.
They are bound to regulate the segment. This will make the business un- attractive.
8. Financial inclusion initiatives taken by the public sector banks/government will marginalize the micro finance business. Do not buy the theories put forth by the BRLMs to sell the issue.
9. The average cost of acquisition of shares by promoters is less than Rs50/-
10. The Andhra Pradesh government has constituted district level ‘Task Force Committees’ (TFCs) to investigate the unethical practices of micro finance institutions in the state. The committees were constituted after the government received many complaints against the loan shark practices adopted by some leading MFI’s of the state.
RECOMMENDATIONS: CLEAR NO.
Search this blog for other articles on Sks micro
FPO ANALYSIS: ENGINEERS INDIA LIMITED – ENGINEERED FOR GROWTH: TIGHTLY PRICED IN THE PRICE BAND OF RS 270-290.
Engineering India Limited (EIL), a mini NAVRATNA, is an engineering consultancy company providing design, engineering, procurement, construction and integrated project management services, principally focused on the oil and gas and petrochemicals industries in India and internationally. EIL also operates in diverse sectors including non-ferrous mining and metallurgy and infrastructure. EIL is providing engineering consultancy services for the GoI’s energy security initiative under its Integrated Energy Policy for strategic crude storages.
Services in these industries and sectors cover the entire spectrum of activities from concept to commissioning of a project. The services include preparation of project feasibility reports, technology selection, project management, process design, basic and detailed engineering, procurement, inspection, project audit, supply chain management, cost engineering, planning and scheduling, facilitation of statutory and regulatory approvals for Indian projects, construction management, commissioning and also provide specialist services such as heat and mass transfer equipment design, environmental engineering services, specialist materials and maintenance services, energy conservation services, plant operation and safety services.
The company was incorporated in 1965 and have over the years developed a strong track record of working on landmark projects with various Indian and global energy majors. Among others, EIL has provided consultancy and project implementation services on more than 49 refinery projects, including eight greenfield refinery projects, seven petrochemical complexes, 35 oil and gas processing projects, 205 offshore platforms projects, 37 pipeline projects, 11 ports and storage and terminals projects, eight fertilizer projects and 26 mining and metallurgy projects.
The business is aligned into two principal operating segments: the Consultancy and Engineering segment and the Lump sum Turnkey Projects segment.
OBJECTS OF THE ISSUE:
The object of the Offer is to carry out the divestment of 33,693,660 Equity Shares by the Government. The Company will not receive any proceeds from the Offer and all proceeds shall go to the Selling Shareholder- Government of India. The government plans to raise about Rs 1,200 crore by disinvesting 10 per cent stake in the company.
FINANCIALS:
The total income increased at a CAGR of 47.28% from Rs.887.65 cr in the year ended March 31, 2007 to Rs.2196.96cr in the year ended March 31, 2010, while profit after taxation, increased at a CAGR of 47.31 % from Rs.199.26cr million in the year ended March 31, 2007 to Rs.444.34cr in the year ended March 31, 2010.
13-03-08 | 31-03-09 | 31-03-10 | |
EPS (in Rs) | 5.91 | 10.37 | 13.19 |
RONW | 17% | 24% | 39% |
EQUITY (in cr) | 56.15 | 56.15 | 56.15 |
DIVIDEND PAYMENT(Rs in cr) | 61.77 | 103.88 | 595.25 |
NAV AS ON 31-03-2010 is Rs 34.20.
After the public issue, the government holding in the company will fall to 80.4 per cent from the current 90.4 per cent. Earlier this year, the company had issued bonus shares in the ratio of 2:1. It had also gone for a stock split, with the face value of a unit being cut to Rs 5 from Rs 10 earlier.
STRENGTHS:
· Leadership position across the value chain in the hydrocarbon industry.
· Operations in diverse industries and economies.
· Technology-driven integrated turnkey and total solutions consultancy services.
· Strong financial position and with healthy Order Book.
RISKS:
Dependence on government / government controlled enterprises for business.
The company operates in highly competitive markets. The principal factors affecting competition include customer relationships, technical excellence or differentiation, price, service delivery including the ability to deliver personnel, processes, systems and technology.
In the hydrocarbon sector, EIL competes against major US
EIL’s business is principally focused on projects in oil and gas exploration, development and production, and transportation projects undertaken by large Indian and international energy conglomerates, many of which are directly or indirectly owned or controlled by either the government of the relevant country or relevant government organizations.
VALUATION:
After the recent bonus and split - the company had issued bonus shares in the ratio of 2:1, it had also gone for a stock split, with the face value of a unit being cut to Rs 5 from Rs 10, the company has Rs 168.45cr equity capital consisting of 33,69,36,000 equity shares of Rs 5/- each. Assuming that the company achieves a growth of 30% plus for the FY 11, the EPS would be around Rs 17/- The shares are presently quoting around Rs 340 in the exchanges. (28 PE). Because of low floating stock, the valuations are on the high side.
The recent NMDC’s FPO offer is still quoting below the offer price. The BRLMs and the government should realistically price this issue, leaving some thing for the investors.
RECOMMENDATIONS:
If the issue is going to be priced by less than 15 PE of its FY 11 expected earnings – that is around Rs 240/- APPLY. Other wise skip the issue.
ISSUE DETAILS
Issue Size / FV | 3,36,93,660 shares / Rs5 |
Government holding after the issue | 80.4% |
Issue Type | 100% book building |
Promoters | Government of |
Book Running Lead Manager/s | ICICI securities, HSBC Securities, IDFC Capital and SBI Capital markets |
Issue open / close | 27-07-10 /30-07-10 |
Saturday, July 24, 2010
IPO ANALYSIS: PRAKASH STEELAGE LIMITED WILL SHINE – INVEST.
The Gujarat based stainless steel pipes and tube manufacturer is entering the capital market on 05-08-10, with public issue of 62,50,000 equity shares of Rs 10 FV in the price band of Rs 100-110. The company plans to raise around Rs 70 cr through the issue. Keynote Corporate Services Limited are the sole BRLM. The issue will close on 10-08-10.
Prakash C Kanugo and Ashok M Seth, first generation enterprenners, are the promoters of the company.
BUSINESS:
Prakash Steelage Limited (PSL) is a flagship company of Prakash Group. The company incorporated in 1991 is engaged in the manufacturing of seamless & welded stainless steel Pipes, Tubes and U-tubes. The company has state of the art production units situated at Silvasa and Umbergaon (Gujarat ) with total installed production capacity of 12200 MTPA.
The company is also a government recognized export house, exporting to more than 40 countries. The company caters to diverse set of industries, including oil and gas, power, pharmaceuticals, petrochemicals, automobiles, sugar and dairy.OBJECTS OF THE ISSUE:
- Expansion of existing manufacturing facility at Umbergaon,
- Meet the additional working capital requirement.
- General corporate purposes.
FINANCIALS:
The company achieved a turnover of Rs 440 cr and net profit after tax of Rs 17.50 cr for the year ended March 31, 2010. The figures for the FY 09 were Rs 322.47cr and Rs 7.49cr respectively.
MATTERS OF CONCERN:
· Corporate governance -The income-tax authorities have carried out search and seizure operations in the premises of the Company and during this operation Mr. Prakash C. Kanugo has made certain voluntary disclosures in relation to undisclosed income on behalf of himself and his related individuals/group companies/concerns, which included the Company. Under which, tax paid on the un declared income was Rs. 2,70,96,896/-
· The company experienced a negative Operating Cash Flow from activities in the Financial Year 2008-09, 2007-08, 2006-07 and 2005-06.
VALUATION AND RECOMMENDATIONS:
Based on the capacity expansion from12, 200 tonnes to 19,000 tonnes, the company is likely to achieve a CAGR around 30% for FY 11. The company specializes in meeting specific requirements of customers and offers complete solution for stainless steel welded & seamless pipes and tubes, for which there is growing demand.
On the post issue capital of Rs 17.50cr, the company is likely to post an EPS of Rs 15/. At Rs 100-110 the issue is attractively priced. Compares favorably with other established and listed entities like Zenith Birla and Ratnamani Metals and Tubes. APPLY.
Wednesday, July 21, 2010
TEN REASONS WHY ONE SHOULD NOT INVEST IN SKS MICRO FINANCE IPO
1. Unethical business: The Company is charging interest around 40% p.a. on money lent to the poor and down trodden.
2. Unsustainable business model: The business model will not sustain in the long -run.
3. No commitment from the promoters: SKS’s founder and chairman sold his shares to Tree Line Asia Master Fund (Singapore) Pte for $12.9 million in Feb. this year.
4. Look at the salary of top executives :
Suresh Gurumani - Managing Director of the Company. The total monthly salary is Rs. 12, 50,000. In addition to the above, Mr. Suresh Gurumani was paid onetime bonus of Rs. 10,000,000, in April 2009.
Dr. Vikram Akula - chairman Rs 70.00 lacs p.a. In addition, ESOP amounting to Rs10.97lacs, totaling Rs 1.79cr p.a.
The irony is they are trying to eradicate poverty.
5. Mohd. Yunus says - “I get very worried when investment funds come to microfinance,” said the founder of Bangladesh’s Grameen Bank, which pioneered the industry by giving small loans to rural women to start their own businesses. “I don’t want to excite businessmen that there is profit to be made here,”
6. The IPO will make the promoters, and other venture capitalists including some P/E funds that have stakes in these companies’ millionaires. The hapless borrowers continue to live in abject poverty.
7. Government /RBI will not be mute spectators to the exploitation.
They are bound to regulate the segment. This will make the business un- attractive.
8. Financial inclusion initiatives taken by the public sector banks will marginalize the micro finance business. Do not buy the theories put forth by the BRLMs to sell the issue.
9. The average cost of acquisition of shares by promoters is less than Rs50/-The Company has limited period of history and no dividend payment record.
10. The Andhra Pradesh government has constituted district level ‘Task Force Committees’ (TFCs) to investigate the unethical practices of micro finance institutions in the state. The committees were constituted after the government received many complaints against the loan shark practices adopted by some leading MFI’s of the state.
SKS MICRO FINANCE IPO - SALARY DETAILS OF TOP EXECUTIVES - BLOOD SUCKED FROM THE POOR
Suresh Gurumani - Managing Director of the Company.
The total monthly salary is Rs. 12, 50,000, comprising of the following;
Basic Salary – Rs. 585,206
House Rent Allowance – Rs. 234,082
Children Education Allowance – Rs. 200
Medical Allowance – Rs. 1,250
Fuel Reimbursement – Rs. 9,000
Leave Travel Allowance – Rs. 43,890
Driver’s Salary – Rs. 7,000
Vehicle Maintenance and Insurance - Rs. 7,000
Food Vouchers - Rs. 7,500
Post Allowance - Rs. 275,284
Employer Contribution to Provident Fund - Rs. 79,588
In addition to the above, Mr. Suresh Gurumani is entitled to a onetime bonus of Rs. 10,000,000, which was paid in April 2009.
Dr. Vikram Akula Rs 70.00 lacs p.a. In addition, ESOP amounting to Rs10.97lacs, totaling Rs 1.79cr p.a.
What an irony, they are trying to eradicate poverty!
The total monthly salary is Rs. 12, 50,000, comprising of the following;
Basic Salary – Rs. 585,206
House Rent Allowance – Rs. 234,082
Children Education Allowance – Rs. 200
Medical Allowance – Rs. 1,250
Fuel Reimbursement – Rs. 9,000
Leave Travel Allowance – Rs. 43,890
Driver’s Salary – Rs. 7,000
Vehicle Maintenance and Insurance - Rs. 7,000
Food Vouchers - Rs. 7,500
Post Allowance - Rs. 275,284
Employer Contribution to Provident Fund - Rs. 79,588
In addition to the above, Mr. Suresh Gurumani is entitled to a onetime bonus of Rs. 10,000,000, which was paid in April 2009.
Dr. Vikram Akula Rs 70.00 lacs p.a. In addition, ESOP amounting to Rs10.97lacs, totaling Rs 1.79cr p.a.
What an irony, they are trying to eradicate poverty!
IPO NEWS :HINDUSTAN MEDIA VENTURES LISTS AT 15.36% PREMIUM
Hindustan Media Ventures Limited, which had issued the shares at Rs 166/- were listed in the exchanges today. As against the issue price, the shares were closed at Rs 191.50/-at the NSE.
FIRST CHOICE HAD RECOMMENDED FOR SUBSCRIPTION TO THE ISSUE. ONCE AGAIN FIRST CHOICE WAS CORRECT.
Tuesday, July 20, 2010
MICRO FINANCE – WHOM DO THEY REALLY BENEFIT, WHAT IS THE SOCIAL PERFORMANCE OF MICRO FINANCE INSTITUTIONS?
SKS MICROFINANCE LIMITED is hitting the market shortly. Many others in this sector have lined up for IPOs. The bubble is growing bigger each day. These companies are similar to the finance and leasing companies that mushroomed in the late seventies and early eighties and disappeared into thin air subsequently. More over, Micro financing started as a social cause enterprise is turning out to be blood-sucking business. The poorest of the poor and hapless sections of the society are being exploited. More and more entrepreneurs and PE funds are eager to do business in this segment.
The Micro Finance Institutions, instead of providing credit at affordable interest rate, exploiting the situation and looking for a return on investments in excess of 30% p.a. The borrowers pay exorbitant rate of interest. Most of their income goes for servicing the debt with no savings. This kind of situation is no better than the one the poor borrowers had experienced with the traditional moneylenders. They also defeat the very purpose of establishing the Micro Finance Institutions. The ultimate goal of micro finance is to enable the poor to build assets, increase incomes, reduce vulnerability to shocks and economic stress and improve quality of life by enabling better access to education and health-care. How can they do that with that kind of interest structure?
Micro finance should not be viewed as a business venture where one can expect very high return on investments. Governmental and statutory regulations, including the imposition of an interest-rate ceiling, are bound to happen. This will adversely affect the operating results. More importantly, the sector, which sucks the blood of the poorest of the poor,does not deserve any support. The IPOs will make the promoters, and other venture capitalists including some P/E funds that have stakes in these companies millionaires. And the hapless borrowers continue to live in abject poverty. It is time that the regulators look into this ugly side of micro financing.
SKS MICRO FINANCE - RESULTS - CAUSE, EFFECT AND SIDE EFFECTS, WHOSE CASH IT IS ANY WAY?
SKS Micro Finance earned profit before tax of Rs 267.70 crore on the total income of Rs 958.92cr for the FY 2010. The basic is EPS of Rs 33, much more than some of the large software companies. The country’s largest micro financier is exploiting the poorest of the poor in rural India in the name of providing credit access to them. The company charges interest between 27% -36% p.a. on money lent to the poor. On the one hand, the company says, that there is no scope for reducing the interest; on the other hand, the company is posting robust profits year after year. The so-called valuations they are trying to create for the company is to serve for their own selfish motives. That will benefit the handful of shareholders / promoters.
Nobel laureate Muhammad Yunus, speaking at the Fairmont Hotel, USA, on May 24, said he is increasingly wary of the direction the booming micro finance industry is taking.
“I get very worried when investment funds come to microfinance,” said the founder of Bangladesh’s Grameen Bank, which pioneered the industry by giving small loans to rural women to start their own businesses. “I don’t want to excite businessmen that there is profit to be made here,” he said. Private investors and capital have increasingly moved into the realm of the grassroots micro finance industry, boosting its assets to more than $60 billion globally.
Yunus has called for standardizing the rates of interest in micro lending, which can range from 12 percent to more than 87 percent globally. His formula for determining interest rates calls for no more than 12-15 percent beyond the cost of raising the capital.
“Poor people should not be presented as an opportunity to make money. Then you move in the direction of loan shark,” said Yunus, who is on a several-city U.S. tour to promote his new book, “Building Social Business: The New Kind of Capitalism that Serves Humanity’s Most Pressing Needs,” released in May by Public Affairs Books.
“We started out with the idea of getting loan sharks out of people’s lives,” said Yunus, in his remarks to the sold-out audience in the Fairmont Hotel’s ornate Gold Room. “Now micro finance institutions are getting into the loan-sharking business,” he said. “If you’re making money out of poor people, then you’re loan-sharking.”
In a brief interview with India-West following his talk, Yunus expressed his aversion to the new trend of micro finance institutions undergoing initial public offerings.
During his hour-long talk, Yunus focused on his concept of “social business,” the subject of his new book. Social businesses, as defined by Yunus, are cause-driven businesses, targeting areas often neglected by companies that are more traditional. The aim of a social business is to achieve a social objective.
FOR DETAILED ANALYSIS SEARCH THIS BLOG.
Nobel laureate Muhammad Yunus, speaking at the Fairmont Hotel, USA, on May 24, said he is increasingly wary of the direction the booming micro finance industry is taking.
“I get very worried when investment funds come to microfinance,” said the founder of Bangladesh’s Grameen Bank, which pioneered the industry by giving small loans to rural women to start their own businesses. “I don’t want to excite businessmen that there is profit to be made here,” he said. Private investors and capital have increasingly moved into the realm of the grassroots micro finance industry, boosting its assets to more than $60 billion globally.
Yunus has called for standardizing the rates of interest in micro lending, which can range from 12 percent to more than 87 percent globally. His formula for determining interest rates calls for no more than 12-15 percent beyond the cost of raising the capital.
“Poor people should not be presented as an opportunity to make money. Then you move in the direction of loan shark,” said Yunus, who is on a several-city U.S. tour to promote his new book, “Building Social Business: The New Kind of Capitalism that Serves Humanity’s Most Pressing Needs,” released in May by Public Affairs Books.
“We started out with the idea of getting loan sharks out of people’s lives,” said Yunus, in his remarks to the sold-out audience in the Fairmont Hotel’s ornate Gold Room. “Now micro finance institutions are getting into the loan-sharking business,” he said. “If you’re making money out of poor people, then you’re loan-sharking.”
In a brief interview with India-West following his talk, Yunus expressed his aversion to the new trend of micro finance institutions undergoing initial public offerings.
During his hour-long talk, Yunus focused on his concept of “social business,” the subject of his new book. Social businesses, as defined by Yunus, are cause-driven businesses, targeting areas often neglected by companies that are more traditional. The aim of a social business is to achieve a social objective.
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Monday, July 19, 2010
FORTHCOMING IPOS
NAME OF THE COMPANY | Virgo Engineers Limited |
BUSINESS | Manufacturers of valves |
PROMOTERS | V. BALASUBRAMANIAN AND MAHESH DESAI. |
ISSUE SIZE | ISSUE OF 13,430,346 EQUITY SHARES WITH A FACE VALUE OF RS. 10 |
Premium/ FV | - |
LEAD MANAGER | IDFC Capital, Edelweiss Capital Limited |
OBJECTS | Fund capital expenditure, fund capital expenditure at Subsidiaries, fund capital expenditure towards our information technology infrastructure, funding the repayment of a portion of the debt. |
NAME OF THE COMPANY | EMBASSY PROPERTY DEVELOPMENTS LIMITED |
BUSINESS | CONSTRUCTION/INFRA |
PROMOTERS | JITENDRA VIRWANI |
ISSUE SIZE | Rs 2400 cr |
Premium/ FV | - |
BRLM | UBS, NOMURA,CITI, EDELWEISS |
NAME OF THE COMPANY | ENTERTAINMENT WORLD DEVELOPERS LIMITED |
BUSINESS | OWN/ MANAGE SHOPPING MALLS/INFRA/HOSPITALITY PROJECTS |
PROMOTERS | Manish Kalani, Kalani Brothers ( |
ISSUE SIZE | PUBLIC ISSUE OF 38,928,943 EQUITY SHARES OF Rs. 10 FV |
Premium/ FV | - |
BRLM | ICICI Securities, Kotak Mahindra Capital, Edelweiss Capital |
OBJECTS | Fund construction of certain Ongoing Projects, redemption of debt. |
NAME OF THE COMPANY | TUNIP AGRO LIMITED |
BUSINESS | MANUFACTURERS OF FRUIT JUICES (ONJUS) |
PROMOTERS | SIDDHANT GOYAL AND MS. NEETA GOYAL |
ISSUE SIZE | RS 45.50CR |
Premium/ FV | - |
BRLM | KEYNOTE CORPORATE SERVICES LTD. |
OBJECTS | Setting up of manufacturing facilities at Meet the fund requirement for working capital |
Saturday, July 17, 2010
TECHNO FAB LISTS AT PREMIUM
The New Delhi based EPC company's shares were listed in the exchanges yesterday. The company had issued 29, 90,000 equity shares of Rs 10 FV in the upper price band of Rs 240. As against the issue price, the shares were closed at Rs 290/- The issue opened on 29-06-10 and closed on 02-07-10. The issue constitutes 28.50% of the post issue paid-up equity capital.
FIRST CHOICE HAD RECOMMENDED FOR SUBSCRIPTION TO THE ISSUE. AGAIN THE ANALYSIS AND RECOMMENDATIONS OF THE FIRST CHOICE WERE PROVED CORRECT.
FIRST CHOICE HAD RECOMMENDED FOR SUBSCRIPTION TO THE ISSUE. AGAIN THE ANALYSIS AND RECOMMENDATIONS OF THE FIRST CHOICE WERE PROVED CORRECT.
Wednesday, July 14, 2010
IPO ANALYSIS -MIDFIELD INDUSTRIES LIMITED - LOOSELY PACKED – AVOID
The Hyderabad based packaging consumable manufacturer is entering the capital market on 19-07-10, with public issue of 45, 00,000 equity shares of Rs 10 FV in the price band of Rs 126-133 through book building process. Atherstone Capital Markets are the sole BRLM. The issue will close on 21-07-10.
M MADHU MOHAN REDDY AND MRS. M SUPRAJA are the promoters of the company.
BUSINESS
Midfield Industries Limited (MIL) is one of the organized players in packaging industry catering to the demand for Industrial packaging consumables in India
OBJECTS OF THE ISSUE: (Total cost appx. Rs 60cr)
- Expansion of existing manufacturing facility at Hyderabad, by setting up PET
Strap, Stretch Films, PP Strapping, Collated nails – nails making machine,
- Setting up new facility for manufacture of VCI Paper at
- Expansion at existing manufacturing facility at Mumbai, by setting up Angle
Board, Collated Nails Seals and Heat Treatment Plant.
- Expansion at existing manufacturing facility at Roorkee, by setting up Angle
Board and Collated Nails and Seals.
- Setting up new facility for manufacturing High Tensile Steel Strapping and seals.
- Augmenting Long Term Working Capital Requirement
FINANCIALS:
Net Sales of MIL has increased from Rs.45.54 Cr in FY06 to Rs.90.51 Cr in FY10. MIL derives approximately 70% -75% of its revenues from the sale of Steel Strapping; Trading in VCI paper, polyester strapping and Stretch film contributes another 5% while the rest of the revenue comes from products such as Angle boards, seals and collated nails. Net sales have been growing at a CAGR of 17% between FY06 and FY10. The company earned a net profit of Rs 8.14cr on Rs 8.32 share capital giving an EPS of Rs 9.77.
RISKS/MATTERS OF CONCERN
1. IPO GRADE -2 by BRICK WORKS. The grading is constrained by competitive nature of the industry, volatility in the raw material prices, low pricing power, weak second line of management and long working capital cycle.
2. High working capital intensive with average receivable in the range of 155 – 207 days for past 3 years. Both the suppliers of raw material and its clients are relatively large companies leaving MIL with little bargaining power.
3. Joint Venture with M/s Centaur Equipos de Flejado of Spain to setup a Company with the object of setting up a Steel Strapping manufacturing facility in India.
4. The Trade Marks of the Company is not registered and in case the company does not receive the registrations, it may affect the business goodwill.
5. Rapidly changing technology may render the business nonviable if not adopted quickly.
6. Majority of the regulatory approvals/registrations with regard to the manufacturing facilities being set up, as well as, the proposed expansion of the existing facilities are yet to be applied.
7. The project has not been appraised by a bank or term lending institution, the project cost is estimated by the company management.
OUT LOOK FOR PACKAGING INDUSTRY
The global packaging industry is expected to grow to USD 597 billion by 2014. India
The Indian packaging industry is growing at a CAGR of 20-25% p.a. Growth in certain segment of the industry (such as laminated products and paperboard) is as high as 30% p.a.
VALUATION AND RECOMMENDATIONS:
Assuming that the company will post an EPS of Rs 9 for the FY 11, on the expanded post issue capital of Rs 12.81cr, the company is demanding a valuation around 14 times, which appears to be on the high side for a mid sized and not so professionally managed company. It is difficult to see any listing gains. AVOID SUBSCRIPTION.
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