Review By on February 6, 2018
Bhatia Communications & Retail (India) Ltd. (BCRL) is engages into retail and whole sell distribution business of mobile handsets, tablets, data-cards, mobile accessories, mobile related products etc. It sells smart mobile handsets of all the brands including Apple I-phone, Samsung, OPPO, GIONE, VIVO etc. under one roof at its owned 72 retail outlets chain and 24 franchisee retail chain dealers in Southern Gujarat region. To offer credit/EMI facilities to its customers, company has tied up with leading credit houses like Bajaj Finserve, Capital First etc. BCRL also provides after sale services for all these products and also enjoys warranty on them from suppliers of such products. Company operates under brand names like “Bhatia Communication, Bhatia Mobile – The mobile One Stop Shop”
To part finance its working capital, general corpus fund needs, BCRL is coming out with a maiden IPO of 1650000 equity shares of Rs. 10 each at a fixed price of Rs.150 per share to mobilize Rs. 24.75 crore. Issue opens for subscription on 08.02.18 and will close on 12.02.18. Issue comprises fresh equity issue of 1400000 shares and offer for sale of 250000 shares. Minimum application is to be made for 1000 shares and in multiples thereon, thereafter.
Issue constitutes 26.37% of post issue paid up capital of the company. Average cost of acquisition of shares by the promoters is Rs. 0.021 and Rs. 30.45 per share. Issue is solely lead managed by Guiness Corporate Advisors Pvt. Ltd. and Purva Sharegistry (India) Pvt. Ltd. is the registrar to the issue. Post allotment, shares will be listed on BSE SME. It raised initial equity at par and has issued bonus shares in the ratio of 50 for 1 (November 2013), 6 for 1 (September 2017) and 1 for 3 (January 2018. In September 2017 it converted preference shares in equity at a price of Rs. 400 per share. Post issue its current paid up equity capital of Rs.4.86 crore will stand enhanced to Rs. 6.26 cr.
On performance front, BCRL has posted turnover/net profits of Rs. 104.12 cr. / Rs. 0.35 cr. (FY14), Rs. 110.57 cr. / Rs. 0.34 cr. (FY15), Rs. 96.08 cr. / Rs. 0.31 cr. (FY16) and Rs. 133.49cr. / Rs. 0.48 cr. (FY17). For the first half of current fiscal, it has earned net profits of Rs. 1.31 cr. on a turnover of Rs. 85.24 cr. It suffered a setback in FY 16. Sudden jump in first half top and bottom line is surprising. For last three fiscals it has posted an average EPS of Rs. 7.22 (on pre-bonus equity) and Rs. 0.82 (on post bonus equity) and an average RoNW of 10.09. On post bonus basis, asking price is at a P/E ranging from 153 to 183 and at a P/BV of 11 plus on the basis of its NAV of Rs. 13.34 as on 30.09.17 and at a P/BV of 3.63 on the basis of post issue NAV of Rs. 41.33, thus issue is exorbitantly priced. P/Es of its listed peers are Vmart (75), V2 Retail (90) and Trent (105). If we annualize latest earnings and attribute it on fully diluted post issue equity then asking price is at a P/E of 35 but the sustainability of profitability is a major concern.
On merchant banker’s front, this is the 24th mandate from its stable in last three years. Out of last 10 listings, 2 opened at discount, 2 at par and the rest with a premium of 5% to 20% on the day of listings.
Company’s peers are no comparable on an apple to apple basis. It is operation in the highly competitive field with many unorganized players. Considering its exorbitant pricing one may give it a miss.
Review By on February 6, 2018
Dilip Davda is a veteran financial journalist associated with the Indian stock market since 1978. He has been contributing to print and electronic media on capital markets, insurance, and finance since 1985.
He is widely recognized for reviewing public issues and non-convertible debentures (NCDs) in the primary market. Drawing on over three decades of market experience and close interaction with merchant bankers, his reviews focus on detailed fundamental and financial analysis of companies, with a special emphasis on SME public issues.
Dilip Davda
SEBI Registered Research Analyst – Mumbai
Registration No.: INH000003127 (Perpetual)
Email: dilip_davda@rediffmail.com
Disclaimer: The information provided herein is solely for educational and informational purposes and does not constitute an offer, solicitation, or recommendation to buy or sell any securities. Readers are advised to consult a qualified financial advisor before making any investment decisions. Investments in the securities market are subject to market risks. The author does not intend to invest in the securities discussed.
The initial public offer (IPO) of Bhatia Communications & Retail (India) Ltd. offers an early investment opportunity in Bhatia Communications & Retail (India) Ltd.. A stock market investor can buy Bhatia Communications IPO shares by applying in IPO before Bhatia Communications & Retail (India) Ltd. shares get listed at the stock exchanges. An investor could invest in Bhatia Communications IPO for short term listing gain or a long term.
Read the Bhatia Communications IPO recommendations by the leading analyst and leading stock brokers.
Bhatia Communications IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Bhatia Communications IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts mentioned in the above answer to "How is Bhatia Communications IPO?"
Our recommendation for Bhatia Communications IPO is to avoid.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Bhatia Communications IPO.
The Bhatia Communications IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit Bhatia Communications IPO allotment status to check.
