ISSUE OPENS / CLOSES ON - 10-08-11 / 12-08-11
PRICE BAND RS 135 - 153, RS 6 Discount for retail share holders.
IPO GRADE 3/5 BY CRISIL.
Before analyzing this IPO let us analyze the IPOs managed by the BRLMs- JM Financials and Motilal Oswal, in the calendar year 2010 and 2011.
J M FINANCIALS: PAST PERFORMANCE.
| NAME OF THE COMPANY |
ISSUE PRICE (RS)
|
CMP 05-08-11 (RS)
|
| PFC (FOP) | 203 | 175 |
| FUTURE VENTURES | 10 | 9 |
| PTC INDIA FINANCIALS | 28 | 18 |
| CLARIS LIFE
| 228 | 149 |
| BS TRANSCOM | 248 | 105 |
| ORIENT GREEN POWER | 47 | 13 |
| CAREER POINT | 310 | 310 |
| STD CHTD BK IDR | 104 | 89 |
| JAYPEE INFRA | 102 | 43 |
| SJVNL | 26 | 22 |
| NITESH ESTATES | 54 | 21 |
| ILFS TRANSPORT | 258 | 204 |
| REC (FOP) | 203 | 195 |
| L&T FINANCE HOLDINGS
| 52 | YET TO LIST |
Out of the 13 issues managed so far, NONE OF THE IPO/FPO are quoting above the issue price.
MOTILAL OSWAL has managed only two issues. Out of the two, one IPO – Galaxy Surfactants was withdrawn due to poor response. The other one - Ashoka Buildcon is trading at Rs 270 as against the IPO price of Rs 324.
Tree House is India’s largest self-operated Preschool education provider running 177 Preschools in 23 cities. More than 72% of its branches are concentrated in western India, of which 80% is concentrated in Mumbai. Tree House has also ventured into ancillary services like preschool teacher training and day care.
The self-operated pre-schools serve more than 5,000students, apart from the students at the franchisee operated pre-schools, primarily in the age group of1.5 to 6 years. In recent years, the company also ventured into offering educational services to K-12 schools.
In the pre-schools, Tree House offers standardized services and innovative teaching methodologies, including playschool, nursery facilities, vacation camps, mother-toddler classes, hobby classes, day care facilities and teacher training course. The company claims have a team of more than 400 teachers at the self operated pre-schools. Tree House’s pre-schools are largely concentrated in the states of Maharashtra, Gujarat, Karnataka, Rajasthan and Andhra Pradesh
OBJECTS OF THE ISSUE:
The objects of the issue are to fund expansion, acquisition of office space, repayment of loan and for general corporate purposes.
FINANCIALS:
RS IN CRORES
|
| 31-03-09 | 31-03-10 | 31-03-11 |
| TOTAL INCOME | 10.64 | 21.87 | 41.15
|
| PAT | 0.51 | 2.59 | 9.15 |
| EPS (RS)
| 0.41 | 1.57 | 3.00# |
# Annualized, on post issue capital of Rs 34.84cr.
MATTERS OF CONCERN:
1. Limited business history, operations started in 2008.
- As of now this segment is unregulated. Government may regulate this segment in future, similarly, as was done in case of Micro Finance Institutions. It depends on the business ethics, greediness of the promoters or otherwise.
- There are debtors outstanding for more than 180 days, which raises genuineness of the revenue earned.
- RONW in the last 3 years is less than 6%.
- There are corporate governance issues – company has delayed the income tax payments and other statutory dues.
VALUATION AND RECOMMENDATIONS:
At Rs 135-153, the stock is offered around 30 PE, on its estimated FY12 earnings, which is expensive.The company is into new kind of business which may evoke good response to the IPO. There are many grey areas particularly with regard to corporate governance. The company will have a post issue capital of Rs 34.85cr. Even to show an EPS of Rs 5 the company has to earn a PAT of Rs 17.50cr, in FY 12, which is a tall order. Like micro finance, education too politically sensitive segment. Any wrong doing will attract harsh measures from the government.
The performance of any company on the eve of an IPO is to be taken with a pinch of salt. Since this is a concept stock there could be listing gains.
The track records of the BRLMs are pathetic.
INVEST FOR PROBABLE LISTING GAINS.
