Birla Pacific Medspa is planning to set up 55 health care centers under the brand name ‘EVOLVE’ across the country. To meet the funding requirements, Birla Pacific Medspa Ltd. plans to raise approximately Rs. 65 Crores by way of Initial Public Offering of equity shares, in the price band of Rs 10 -11. Arihant Capital Markets are the BRLM. The IPO opens on 20-06-11 and closes on 23-06-11.
BACK GROUND
Birla Wellness & Healthcare Pvt Ltd, a Yash Birla Group company has a Joint Venture Agreement with Pacific Healthcare Holdings Ltd, a company incorporated in Singapore and Dr. Abhijit Desai, to form Birla Pacific Medspa with equal shareholding between Yash Birla Group and PHH & its associate Dr. Desai put together. PHH is one of East Asia’s leading healthcare providers, with healthcare facilities in Singapore, Hong Kong, and China.
The company proposes in India and abroad to do the business of beauty and healthcare treatments, health and fitness resorts, dieticians, yoga ashrams, saloons, hair and Skin treatments, Sanatorium centers, and to manufacture soaps consumables, oils, medicines, body sprays and scents, creams, powders, natural and artificial skin and hair conditioners. However, the company presently does not carry on the business of manufacturing of soaps, consumables. The company presently operates the healthcare centers under the brand name EVOLVE. As on date, the company operates three own EVOLVE centers in Mumbai at Walkeshwar, Bandra & Andheri and 2 centers on franchise basis at Thane and Chennai.
YASH BIRLA GROUP
Yash Birla Group is one of India’s leading industrial groups.
The group has diversified interest in industries like steel pipes, machine tools, cutting tools, tool holders, iron castings, power solution products, multipurpose engines pumps, electrical appliances, textiles, carpets, furnishing, lifestyle, InfoTech, publication, travel, electricity, property development, cotton ginning etc
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The major companies in the group includes Zenith Birla (India) Ltd, Birla Cotsyn (India) Ltd., Birla Power Solutions Ltd, Dagger Forst Tools Ltd, Birla Precision Technologies Limited (formerly Birla Kennametal Ltd), Birla Transasia Carpets Ltd, Birla AccuCast Ltd, Birla Electricals Ltd, Birla Lifestyle Ltd, Birla Concepts (India) Pvt. Ltd, Birla Shloka Edutech Ltd, Melstar Information Technologies Ltd.
OBJECTS OF THE ISSUE
The funds are intended to meet the capital expenditure towards establishing 55 outlets of Evolve Medspa across various cities and places, meet expenses towards brand promotion and to meet the working capital requirements for running the above centers.
MATTERS OF CONCERNS
- The company has limited operational history and incurred losses in the period.
- The company has taken over Pachealth at Rs 410 lacs, for which there was no independent / out side valuation.
- The business is in preliminary stage of implementation.
- Birla Transasia Carpets is BIFR Company and Birla Bombay is in the defaulter list of RBI.
- In the last 2-3 years, the group IPOs has performed dismally in the exchanges. Birla Cotsyn (FV Rs 1) is quoting at Rs 0.65 as against the issue price of Rs 1.20 (after adjusting to split) and Birla Shloka Edutec is quoting at Rs 18 as against the issue price of Rs 50, Birla Ericssion is shifted to trade for trade category.
- The proposed centers are not doctor led but technician led, which will lose acceptability in the long term with increased awareness among consumers.
- IPO grade 2 by Brickworks -the grading is constrained by delays in project implementation and poor financial performance of the Yash Birla Group of companies raising IPO funds in the past, Birla Pacific Medspa’s negative cash flows and losses, short history of two years of operations, full funding from IPO proceeds and project implementation spread over three years. In absence of funding or appraisal by a bank or term lending institution.
VALUATION AND RECOMMENDATIONS
The company reported a net loss of Rs 4.57cr for the 14 months period ended 30-09-09. The loss earned for the six months period ended 31-03-10 is Rs 3.28cr and for the nine months period ended 31-12-10 is Rs 3.68cr. The accumulated loss as at 31-12-10 is Rs 11.53cr. The book value of the share is less than Rs 9/- It will take couple of years to wipe out loss and come to dividend list. The shares of Yash Birla group are not fancied in the exchanges. A must avoid IPO.