Wealth First Portfolio NSE SME Emerge IPO review (Avoid)

Wealth First Portfolio Managers Ltd (WFPM) is a one stop financial services provider for various types of financial products available in Indian market. Its product portfolio provides right mix of financial assets that suits financial goal in short and long term depending on client’s perception and need. WFPM offers in depth research for products that delivers compatible performance in terms of yield as well as it make sure that investments stays secure over the period, though market risk is always there which are beyond company’s control.

The company offers various financial instruments according to risk appetite and holding period of client that includes Government Bonds & Securities, Direct Equity, Cash Management Services, Derivative products, Mutual Funds, Insurance products, Commodities, REITS and Market Making Services. It is registered with BSE Limited and National Stock Exchange of India Limited as its member. WFPM is also registered with CDSL as Depositary Participants. Major part of its revenue comes from sale & purchase of taxable & tax-free bonds and brokerages & Commission from Mutual fund distribution business.

To augment long term working capital for its Bond market operations, upgrading technology, expansion of domestic operations for Mutual Fund distributions and to raise general corpus fund, the company is coming out with a maiden IPO for 1680000 equity share of Rs. 10 each at a fixed price of Rs. 50 per share to mobilize Rs. 8.40 crore. Issue opens for subscription on 10.03.16 and will close on 18.03.16. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter. Sarthi Capital Advisors Pvt Ltd is the lead manager to the issue and Bigshare Services Pvt Ltd is the registrar. Post allotment shares will be listed on NSE SME Emerge platform. The issue will constitute 26.29% of the post issue paid up capital of the company. From 2002 to 2007 it issues equity shares at par. In 2010 and 2011 it issues shares at a price of Rs. 100 per share. In October 2015 it issued bonus shares in the ratio of 3 shares for every 1 share held. Its existing paid up equity capital of Rs. 4.71 crore will stand enhanced to Rs. 6.39 crore post this issue. Cost of acquisition of shares by promoters is Rs. 2.50 per share.

On performance front, the company has shown inconsistency in top and bottom lines for last five fiscals. For FY 2011 to FY 2015 its top lines were Rs. 258.68 cr., Rs. 211.01 cr., Rs. 199.66 cr., Rs. 143.53 cr., Rs. 169.67 cr. while its net profits were Rs. 0.10 cr., (Rs. 0.04 cr.,), Rs. 0.19 cr., Rs. 0.14 cr. and Rs. 2.02 cr. respectively.  FY 2015 marked other income of Rs. 2.72 cr. against previous four year’s average of Rs. 0.33 cr. For first six months ended 30.09.15 it has earned net profit of Rs. 0.67 cr. on a total income of Rs. 49.16 cr. If we attribute these earnings on annualized basis on fully diluted equity post IPO, then asking price is at a P/E of around 24 and at a P/BV of 1 plus. Thus issue is priced aggressively.

On merchant banker’s front, this is 15th IPO from its stable and earlier mandates have shown mixed trends.