RCI Industries & Technologies Ltd IPO Review (Avoid)

While primary market remained near dormant for the year calendar year 2013 except Just Dial main line IPO and PGCIL FPO, it just turned out to be the year of SME IPOs. We have two SME IPOs opening in the last week of December 2013. One of them is RCIITL. Details of the same are as under:

RCI Industries and Technologies Ltd. (RCIITL) is a diversified turnover conglomerate and are committed towards high quality products & credit with several innovations over last twenty one years. In past few years the company has consolidated its position through successful forays into diversified sectors like trading of all types of ferrous and Non ferrous Metals such as Copper Wires, ingot, scrap, power cables and other related items used in various electrical and industrial applications. Company also exports Indian Handicrafts especially metal based. RCIITL operates as an important intermediary in the Metals Supply Chain whereby it import/purchase materials such as Annealed/Un-Annealed Copper Wires, Bunched Copper Wires, Aluminium Wires etc. from various suppliers and supply the same to customers in the Metal Business. It offers a diversified product range which includes variety of grades, thickness, widths and standards, in of all types of ferrous and Non ferrous Metals according to customer specifications.

RCIITL is thus engaged in the sphere of offering and exporting Copper Wires which include Annealed Copper Wire, Bunched Copper Wire Ropes and Copper Ingots, which are used in different electrical and industrial applications.

To finance its general capital requirements and corpus fund the company is offering 2880000 equity shares of Rs. 10 each at a fixed price of Rs. 40 per share to mobilize Rs. 11.52 crore. . The issue opens for subscription on 30.12.13 and will close on 06.01.14. Minimum application is to be made for 3000 shares and in multiples thereof, thereafter. Sarthi Capital Advisors Private Limited is the lead manager to the issue and RCMC Share Registry Private Limited is the registrar. Shares will be listed on BSE SME. Post this issue its existing equity capital of Rs. 8.02 crore will rise to Rs. 10.90 crore. Between 1997 to 2013 it issued equity shares at a price of Rs. 40 to Rs. 70 per share and has capitalized reserves with bonus issues in December 1999 (2 for 1). 

On performance front inconsistency is marked in company’s financial performance. The company has posted an average EPs of Rs. 1.74 for last three fiscals and for Q1 of current fiscal it has earned net profit of Rs.0.36 crore on a turnover of Rs. 100.27 crore. If we attribute these earnings on annualized basis on expanded equity of Rs. 10.90 crore after this issue, the asking price is at a P/E of 30.5 plus making it an expensive offer.

This is the fourth SME issue from the lead manager that has mixed track record.