Satkar Finlease Limited IPO Review (Avoid)

US Fed's action brought Thursday Thunder and it was hoped that RBI too will have some surprises that will open the way for dormant primary market. But RBI disappointed with status quo on rates and on the contrary raised Repo rates that spoil the market sentiment and also belied hope for revival of primary market. Despite this, while we have some lucrative NCD and Tax Free bonds offer making rounds in primary market, we have yet one more SME platform IPO entering this week. Details of the said IPO are as under:

Satkar Finlease Ltd is a non-deposit taking, NBFC, and has been in the business of providing financial services since inception. The company is primarily focusing in providing inter corporate loans, personal loans, loans against shares & securities, loans against properties, trade financing, bills discounting, trading in shares & securities and arbitrage business in stock and commodity market. Being an, NBFC it has positioned itself between the organized banking sector and local money lenders, offering the customers competitive, flexible and timely lending services.

To part finance its proposed expansion of activities in financing and brand building as well as meeting corpus funds, it is offering 7504000 equity share of Rs. 10 each at a fixed price of Rs. 18 per share. The issue opens for subscription on 25.09.13 and will close on 27.09.13. Sole manage to the issue is GUINESS CORPORATE ADVISORS PVT. LTD. and registrar to the issue is Mas Services Ltd.  Post allotment of IPO shares will be listed on BSE SME. Minimum application is to be made for 8000 shares and in multiples thereof, thereafter.

As for company's track record, for last three fiscals it has posted an average EPS of Rs. 0.22. For the year ended 31.3.2013 it earned net profit of Rs. 0.11 crore on a total income of Rs. 0.61 crore on an equity base of Rs. 3.25 crore. This capital is now at Rs. 11.54 crore before IPO and will rise to Rs. 19.04 crore post IPO. In 2010 company splitted its face value form Rs. 10 to Re. 1 and issued 10000000 shares at Rs. 14.95 per share and 1900000 shares at Rs. 21 per share. In July 2013 it consolidated its face value from Re. 1 to Rs. 10 and also issued 20000 shares at Rs. 25 per share on 09.07.13 and 2500000 shares at par at Rs. 10 on 01.08.13 and then issued bonus shares in the ratio of 1 for 1 on the same date to take the subscribed equity to Rs. 11.54 crore.  If we attribute fiscal 2012-13 earnings on fully diluted equity of Rs. 19.04 crore then the EPS stands at just Rs. 0.01 per share thus the asking price is at 1800+ P/E. Its NAV is at s. 65.10 as on 31.03.13 and will get diluted to Rs. 19.54 post this issue.

On merchant banker's mandate performance front, it has not given track records in prospectus and has just put note for referring it on their web site. In fact this is the tenth IPO form this merchant banker and on checking web, it just mentions three IPO track records that have done well and is silent on other six IPOs.