BSE’s `SME Platform’ has become a launching pad for many a fly-by-night operator. Sangam Advisors Ltd seems to be one such case.

OFFER AT A GLANCE
Name	SANGAM ADVISORS LTD
Offer Quantity	23.04 lakh shares of Rs 10 each
% on Total Equity	37.8%
Offer Price	Rs 22
Offer Amount	Rs 5.07 cr
Application Quantity	6000 & Multiples of 6000
Offer Opens	July 24, 2012
Bid/Offer Closes	July 26, 2012
Listing	SME Platform of BSE
Rating	Nil
Lead Managers	Aryaman Financial Services
Registrars	Purva Sharegistry

 

The Offer

At a time when regular booking-building offers have completely dried up, the Mumbai-based investment banker Aryaman Financial is trying to add one more public issue to the SME Platform of the BSE in the form of Sangam Advisors Ltd (SAL). The small offer of 23 lakh shares is being sold at a fixed price of Rs 22 per share. As usual, in order to keep the retail investors at bay, the minimum application amount has been kept at Rs 1.32 lakh. In other words, prospective investors have to apply for a minimum 6000 equity shares and multiples thereof.

 

Issue Object

Currently engaged in financial advisory and investment activities, SAL proposes to invest Rs 4.55 cr out of the issue proceeds in listed and unlisted securities.

 

Parentage

SAL’s parentage is far from convincing. The company is claimed to have been promoted by another closely-held company Giza Estates Private Ltd (GEPL) which holds 18.87 lakh shares, equivalent to 31% of the post-public issue capital. The main promoter of GEPL, Gauri Shankar Bajaj, who is designated as the managing director of SAL, started as a stock sub-broker during the boom in mid-nineties. Even while two more executive directors have been appointed by the tiny-sized SAL, a 22-year old has been designated as the CEO of the public company.

 

Valuation 

At the end of fiscal 2012 SAL posted Rs 70 lakh revenue and netted a profit of Rs 22 lakh. Interestingly, the company’s receivables at the end of the year were more than its profit. Its investment portfolio has declined from Rs 5.14 cr in fiscal 2011 to Rs 3.64 cr in fiscal 2012. Post-public issue, the company’s capital base will increase to over Rs 6 cr.  Given the current stock market scenario and the company’s fundamentals it is too early to expect any dividend from this premium issue. 

 

Investment Banker’s Track

If the performance of IPOs managed by SAL’s investment banker Aryaman Financial is any indication, no genuine investor should touch SAL. Aryaman was one of the most active merchant banker during the nineties-boom. It had successfully managed as many as 60 IPOs during the period. Nonetheless, hardly a sixth of these issues are quoting above the offer price today. In fact more than 40 IPOs have vanished from the scene.

 

Concerns

• Sangam is not a dividend paying company
• Financial advisory is a highly fragmented and competitive business
• Very unusual claim of Rs 80 cr against the company by IT Department towards tax arrears
• Promoters’ average cost of holding is only Rs 3.03 a share
• Funding plan not appraised by any external agency
• Promoters’ stake is abysmally low at just 31.4%
• Promoters’ stature and track record far from convincing

Present bottom line too small (Rs 22 lakh) to adequately service the post-IPO capital of Rs 6.1 cr