Monday, May 14, 2012

IPO ANALYSIS: SPECIALITY RESTAURANTS LIMITED – EXPENSIVE RESTAURANT. AVOID SUBSCRIPTION.





ISSUE OPEN / CLOSES ON

16-05-12 / 18-05-12

ISSUE SIZE

1,17,39,415 SHARES OF RS 10 FV

PRICE BAND

RS 146-155

IPO GRADE

4 BY CRISIL

PROMOTERS

ANJAN CHATTERJEE AND SUCHHANDA CHATTERJJE

BRLM

KOTAK MAHINDRA CAPITAL COMPANY

REGISTRAR

LINK INTIME


The IPO is being lead managed by one of the worst BRLM in the country. It appears Kotak has not learnt any thing from their past mistakes.  This IPO is priced around 25 PE and 4 times its book value. This is against the average cost of acquisition of shares by promoters is just 18 paise per share.


Speciality Restaurants is a leading fine-dining restaurant operator. Apart from its flagship Mainland China, the company has a chain of 68 restaurants under various brands like Oh! Calcutta, Machaan, Sigree, Flame & Grill and Haka.  Of  the  69  restaurants,  20  are  under  the  franchise  owned  and company operated model and the rest is owned and operated by the company. 

The company is co founded and promoted by Mr. Anjan Chatterjee, Managing Director, who has over 30 years of experience in the advertising and hospitality industry including his stint as a management trainee at Indian Hotels Company Limited.


OBJECTS OF THE IPO:

The funds are intended to be utilized for establishments of new corporate hospitals (Rs 145cr), developments of food plazas (Rs15cr), Repayment of term loan (Rs10cr) and the rest is for general corporate purposes.
FINANCIALS :( RS IN CRORES)



31-03-10

31-03-11

31-12-11
TOTAL INCOME
 129.75
175.06
152.11
PAT
     9.65
  16.02
  15.01
EPS
     3.18
    4.44
    6.00#
SHARE CAPITAL
     1.70
   34.93
   35.21
NET WORTH
   70.67
   97.29
  112.64
# ANNULISED.

NAV AS ON 31-12-11 IS RS 38.14.

MATTERS OF CONCERNS

  1. The business is labor-intensive. The company depends on dedicated and capable employees.
      2. The costs of compliance with health, safety and environmental laws are significant, and the failure to comply with existing and new health, safety and environmental laws could adversely affect the fortunes of the company.

3. The average cost of acquisition of Equity Shares by its Promoters is just 18 per Equity Share. 

      4. The premises for all of the restaurants and confectioneries are taken on lease and inability to continue the lease rights and keep up with increasing lease rentals in certain key locations.

      5. Food-borne illnesses and resulting negative guest perceptions could adversely affect the business.

      6. Strong competition in the business. The fine dining sector of the restaurant industry in India is subject to competition in respect of price, service, location and food quality.

     7. The Indian food services industry has a history of being fragmented and unorganized and dominated by local players.


Business Strategy

The company intends to leverage on the flagship Mainland China brand while selectively expanding into existing and new markets using the brand equity.
 

VALUATION AND RECOMMENDATIONS

At Rs 146-155, the company is demanding a PE multiple of 20 on its expected earnings for FY13, on its post issue capital of Rs 46.95cr.

The BRLM is one of the worst performing lead managers in the country. Out of the 21 IPOs managed by Kotak in the last 2 years, only 3 are trading above the IPO price. Even an ‘at par’ issue managed is quoting below its issue price. This IPO too has been irrationally priced. It is ridiculous for promoters to ask the IPO investors to subscribe at Rs 146-154, when their cost of acquisition is just 18 paise and the company is not century old. The company was incorporated in 1999.

1 comment:

  1. People like you are cheating retail investors by recommending avoid on these type good IPo's

    ReplyDelete