Review By Dilip Davda on March 12, 2016
Khemani Distributors & Marketing Ltd (KDM) is engaged in the business of trading in FMCG products of Hindustan Unilever Limited (“HUL”) as a 'Redistribution Stockist’ in Surat, Gujarat. Its product portfolio includes (a) personal care products; (b) home care products; and (c) food and drinks products. KDM primarily caters to the retailers and wholesalers of Surat wherein it supply the above range of HUL FMCG products. Currently, it is catering to approximately 3,500 retailers and wholesalers located in Surat. KDM also keeps investing and dealing in securities, in such manner, as it deems fit for the attainment of its main objects.
Initially, in the year 2011 the Company was involved in the business of distributorship of mobile handsets with one of the mobile manufacturers for the territories of Surat district, Tapi district, Navsari district, Silvassa, Daman, Umargaon, Pardi, Dharampur and Valsad town. However, it discontinued the said business in the year 2012.
To repay its high cost debt, generate corpus funds and working capital, the company is coming out with a maiden IPO of 1584000 equity share of Rs. 10 each at a fixed price of Rs. 100 per share to mobilize Rs. 15.84 crore. Issue opens for subscription on 16.03.16 and will close on 18.03.16. Minimum application is to be made for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue is lead managed by Choice Capital Advisors Pvt Ltd and Bigshare Services Pvt Ltd is the registrar to the issue.
On performance front, for last two fiscals it has posted turnover and net profit of Rs. 51.41 cr. /Rs. 0.12 cr. (FY14) and Rs. 68.82 cr. / Rs.7.34 cr. (FT15). Sudden jump in net profit is due to other income of Rs. 9.30 cr. For eight months ended 30.11.15 it has earned net profit of Rs. 0.05 cr. on a turnover of Rs. 47.87 cr. If we annualize and attribute these earnings on fully diluted equity post IPO then asking price is at a P/E of 588 which indicates exorbitant pricing. After initial equity issue at par, it issued equity shares at a price of Rs. 2010 (on Rs. 10 paid up basis) and also issued bonus shares in the ratio of 14 shares for every 1 share held. Its current paid up equity capital of RS. 4.16 crore will stand enhanced to Rs. 5.74 crore post IPO.
On merchant banker’s front, this is the third IPO from its stable and earlier two mandates have failed to bring rewards post listing.
Performance of the company does not match the asking price. Exorbitant pricing makes this issue a high risk, no reward bet. Investors may give it a miss.
Review By Dilip Davda on March 12, 2016
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 Khemani Distributors & Marketing Ltd. offers an early investment opportunity in Khemani Distributors & Marketing Ltd.. A stock market investor can buy Khemani Distributors IPO shares by applying in IPO before Khemani Distributors & Marketing Ltd. shares get listed at the stock exchanges. An investor could invest in Khemani Distributors IPO for short term listing gain or a long term.
Read the Khemani Distributors IPO recommendations by the leading analyst and leading stock brokers.
Khemani Distributors IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Khemani Distributors IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts mentioned in the above answer to "How is Khemani Distributors IPO?"
Our recommendation for Khemani Distributors IPO is to avoid.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Khemani Distributors IPO.
The Khemani Distributors IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit Khemani Distributors IPO allotment status to check.
