Review By Dilip Davda on April 21, 2018
Godha Cabcon & Insulation Ltd. (GCIL) is one of the leading manufacturers of ACSR/AAAC/AAC Conductors in the State of Madhya Pradesh at Indore and have latest machines having best technology. The company is all set to continue its growth momentum with higher installed capacity and good order book position. The prospects are even brighter in view of future procurement plan of state electricity companies. GCIL is also targeting Power Grid Corporation of India Limited to bring its products at national level. It was a proprietary concern till July 2017 and thereafter taken over by the company. It has installed capacity of 15000 MTPA.
To part finance its working capital and general corpus fund needs, GCIL is coming out with a maiden IPO of 3000000 equity shares of Rs. 10 each via book building route with a price band of Rs. 30 – Rs. 33 to mobilize Rs. 9.00 to Rs. 9.90 crore (based on lower and upper price bands). Issue opens for subscription on 27.04.18 and will close on 03.05.18. Minimum application is to be made for 4000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Issue is solely lead managed by Mark Corporate Advisors Pvt. Ltd. and Karvy Computershare Pvt. Ltd. is the registrar to the issue. Issue constitutes 27.03% of the post issue paid up capital of the company. After raising initial equity at par, it raised further equity at a price of Rs.30 per share. Average cost of acquisition of shares by the promoters is Rs. 10.00, Rs. 15.05 and Rs. 29.58 per share. Post issue its current paid up equity capital of Rs. 8.10 crore will stand enhanced to Rs. 11.10 crore.
On performance front, as a proprietary concern it has posted turnover/net profits of Rs. 16.81 cr. / Rs. 0.15 cr. (FY15), Rs. 44.11 cr. / Rs.0.68 cr. (FY16) and Rs. 74.37 cr. / Rs. 1.37 cr. (FY17). For FY18 for the two broken periods ended on 15.07.17 it has posted net profit of Rs. 0.77 cr. on a turnover of Rs. 21.62 crore and then net profit of Rs. 0.93 cr. on a turnover of Rs. 21.23 cr. for period ended 31.10.17. Its paid up equity of Rs. 0.02 cr. as on 31.03.17 increased to Rs. 5.89 crore as on 31.10.17. GCIL has posted an average EPS of Rs. 1.44 for last nineteen months with a negative RoNW. Issue is priced at a P/BV of 2.14 at the upper price band on the basis of its NAV of Rs. 15.42 as on 31.10.17. If we combine two broken periods and annualize the working and attribute it on fully diluted post issue equity, then asking price is at a P/E of around 12 but then sustainability of bottom line is in question. As per offer documents it is showing APAR Ind as its listed peer that is trading at a P/E of around 20 (as on 20.04.18.). On the working scale basis both are not comparable in true sense. Based on FY 17 earnings, asking price is at a P/E of 26 plus.
On merchant banker’s front, this is the 3rd mandate from its stable and last 2 issues opened at a premium ranging from 6% to 12.78% on the day of listing.
Broken FY18 workings with higher profits are bit surprising as it leads to attractive P/E. Cash surplus risk savvy investors may consider moderate investment for long tern at their own risk.
Review By Dilip Davda on April 21, 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 Godha Cabcon & Insulation Ltd. offers an early investment opportunity in Godha Cabcon & Insulation Ltd.. A stock market investor can buy Godha Cabcon IPO shares by applying in IPO before Godha Cabcon & Insulation Ltd. shares get listed at the stock exchanges. An investor could invest in Godha Cabcon IPO for short term listing gain or a long term.
Read the Godha Cabcon IPO recommendations by the leading analyst and leading stock brokers.
Godha Cabcon IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Godha Cabcon IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts mentioned in the above answer to "How is Godha Cabcon IPO?"
Our recommendation for Godha Cabcon IPO is to subscribe for long term.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Godha Cabcon IPO.
The Godha Cabcon IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit Godha Cabcon IPO allotment status to check.
