| Post-Snapshot: PKH Ventures withdrew its IPO due to lack of interest from institutional investors. The issue was reportedly subscribed only 65% till the final day of bidding. According to SEBI rules, an IPO requires overall subscription of at least 90 per cent to sail through. PKH issue was finally subscribed 0.99 times in the retail category, just 0.11 times in QIB and 1.67 times in the NII portion. |
Under the so called disclosure era if issue `Risk Factors’ suppress the dismal performance of promoter’s maiden public venture whose interests are SEBI and IDBI Capital serving?
Non-dividend paying company whose operations are in red of late has entered into several agreements whose terms are highly skewed in favor of the promoter group.
|
PKH VENTURES OFFER AT A GLANCE |
|
| Offer Type | Book Built |
| Platform | Main Frame |
| Offer Size | Rs 379 Cr |
| Fresh Issue | 1,82,58,400 equity shares (Rs 270 Cr) |
| Offer for Sale | 73,73,600 equity shares (Rs 109 Cr) |
| Face Value | Rs 5 |
| Price Band | Rs 140 – 148 |
| Min Quantity | 100 Nos. |
| Implied M-Cap | Rs 1,217 Cr |
| Equity Cap | Rs 41.12 Cr |
| Free Float | 31.06 % |
| Lead Manager | IDBI Capital Markets |
| Registrar | Link Intime |
| Listing | BSE, NSE |
|
INDICATIVE ISSUE SCHEDULE |
|
| Opening : 30-Jun-2023 | Closing : 04-Jul-2023 |
| Allotment : 07-Jul-2023 | Refunding : 10-Jul-2023 |
| Demat Credit : 11-Jul-2023 | Trading : 12-Jul-2023 |
The Offer
The Mumbai based PKH Ventures Ltd (PVL) is making its capital market debut with Rs 379 Cr issue. The IPO consists of a fresh issue of 182.58 lakh equity shares (Rs 270 Cr) by the company and an Offer for Sale of 73.73 lakh equity shares (Rs 109 Cr) by the promoter. The offer is being made through the book-building route with a price band of Rs 140-148 for Rs 5 paid-up share.
Applicants should bid for a minimum lot of 100 shares and multiples thereof. The shares are proposed to be listed on the main frame of BSE and NSE on Wednesday, July 12, 2023. IDBI Capital is acting as the manager to the offer while Link Intime has been roped in as the registrar to the issue. The bidding opens on Friday, June 30 and closes on Tuesday, July 04, 2023.
The company proposes to utilize the net proceeds of the fresh issue towards equity funding of one of its subsidiaries, Halaipani Hydro Project for development of Hydro Power Project (Rs 124 Cr), financing capital expenditure requirements of subsidiary Garuda Construction (Rs 80 Cr) and company’s inorganic growth through acquisitions and other strategic initiatives (Rs 40 Cr). The balance amount is proposed to be utilized for general corporate purposes.
Lineage
PVL was originally incorporated as P. K. Hospitality Services Private Ltd in the year 2000 by three brothers namely, Pravin Kumar Agarwal, Pradeep Kumar Agarwal and Sudhir Kumar Agarwal. However Pravin Kumar Agarwal acquired the shareholding of his brothers under a family settlement in March, 2017.
Pravin Kumar Agarwal is not new to investing public. His maiden public venture Artemis Electricals Ltd (AEL) filed draft prospectus in 2016 for a fixed price issue of about Rs 15 Cr (16.96 lakh shares @ Rs 90 each) through the SME platform of BSE. Navigant Corporate Advisors had been roped in to manage the issue. But, for reasons best known only to the regulators, investment banker and the management, the issue was delayed.
In September 2018 AEL’s DRHP was filed for a book-building issue by another merchant banker, Holani Consultants. Interestingly, the RHP for the IPO was filed on April 10, 2019 by yet another investment banker, Fedex Securities! As per the RHP the IPO was to open on April 24 and to close on April 30, 2019 and the price band had been fixed at Rs 55-60 for Rs 10 paid up share. The band was subsequently revised to Rs 54-60 and the issue closure was extended to May 6. Finally the IPO was priced at Rs 60 and the shares were listed on the SME platform of BSE on May 14, 2019 at a price of Rs 70.
For fiscal 2019 AEL posted encouraging results and the stock price surged to over Rs 175. Though the company maintained the performance in fiscal 2020, the stock price started receding and dropped below Rs 100. AEL quickly moved its stock to the main frame which arrested the price slide temporarily. As the company’s performance took a dip in fiscal 2021, the stock price dropped below the IPO price and hit a low of Rs 34 against the IPO price of Rs 60.
Having failed on the performance front, apparently to hold the stock price, AEL resorted to some cheap gimmicks like changing the company’s name to Artemis Electricals and Projects Ltd (AEPL) in November 2021 and splitting stock’s paid up value from Rs 10 to Re 1 in March 2023. The stock split could lift the market price above the IPO value. But, the company’s working has turned from bad to worse in fiscal 2023.
From Rs 107 Cr in 2020, revenue crashed to Rs 45 Cr in fiscal 2021 and Rs 34 Cr in 2022. From Rs 13 Cr in 2020, net profit plunged to Rs 0.16 Cr in fiscal 2021. In 2022 it has incurred a loss of Rs 12 Cr. PVL’s offer document signed on June 21, 2023 could have disclosed the dismal working of its group company (AEPL) for the fiscal 2023. But, the RHP directs the investing public to visit AEPL’s website to view the latest working results. Actually, the company has revealed the working only for nine months up to December 2022 which is in red.
For not publishing the audited full year results, the company has to say: “Pursuant to the provisions of Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, we hereby submit that that we have encountered certain statutory audit queries pertaining to debenture issue, as well as shareholders’ queries regarding specific documents/ discrepancies. These queries are essential for the finalization of the Audited Financial Results for the Quarter and Financial Year ended 31.03.2023 on a Standalone and Consolidated Basis. Despite the best efforts made by our management, we regret to inform you that we are unable to submit the Audited Financial Results within the stipulated timelines prescribed by Regulation 33 of SEBI (LODR) Regulations 2015.” This is the track record of the promoter’s maiden public venture!
|
Artemis Electricals Financials (in Cr) |
||||||
| Period Ended |
Dec-22 |
Mar-22 | Mar-21 | Mar-20 | Mar-19 |
Mar-18 |
| Months |
9 |
12 | 12 | 12 | 12 |
12 |
| Revenue |
27.24 |
34.33 | 44.95 | 106.92 | 98.75 |
89.48 |
| Operating Profit |
4.79 |
-7.12 | 3.36 | 17.69 | 17.09 |
15 |
| OPM% |
17.6 |
-20.7 | 7.5 | 16.5 | 17.3 |
16.8 |
| Other Income |
0 |
0 | 0.22 | 1.88 | 0 |
0.04 |
| EBIDTA |
4.79 |
-7.12 | 3.58 | 19.57 | 17.09 |
15.03 |
| EBIDTA % |
17.6 |
-20.7 | 7.9 | 18 | 17.3 |
16.8 |
| Interest |
7.43 |
5.89 | 0.8 | 0.85 | 0.97 |
0.37 |
| Depreciation |
1.21 |
1.9 | 2.28 | 1.31 | 1.79 |
0.52 |
| Tax |
0 |
0 | 0.34 | 4.26 | 3.92 |
4.48 |
| Net Profit |
-2.4 |
-11.71 | 0.16 | 12.94 | 10.33 |
9.53 |
| Equity Capital |
25.1 |
25.1 | 25.1 | 24.7 | 17.7 |
4.437 |
| Reserves |
44.54 |
44.54 | 56.08 | 53.56 | 10.6 |
13.53 |
| Borrowing |
NA |
30.21 | 7.82 | 8.40 | 8.94 |
12.28 |
| Fixed Assets |
NA |
29.10 | 16.80 | 19.70 | 16.50 |
16.30 |
| Promoter Stake % |
72.23 |
72.23 | 67.97 | 65.64 | 65.64 |
65.64 |
| High |
65.60 |
69.70 | 141.50 |
189.00 |
||
| Low |
41.25 |
34.15 | 40.40 |
64.15 |
||
| Close |
64.25 |
48.45 | 41.95 | 131.00 |
|
|
| Notes :
|
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It may be recalled that PVL had initiated the process of acquiring a NSE and BSE listed public company, Amar Remedies Ltd (ARL), for Rs 31.59 Cr through the IBC process and deposited Rs 50 lakh as earnest money on the acceptance of the bid under the resolution process. The NCLT, Mumbai approved the resolution plan after deposit of initial funds and performance bank guarantee. However, NSE and BSE issued a circular and a public notice in the year 2019 delisting ARL from the bourses due to historical non-compliances which have been challenged by PVL by way of a Writ Petition before the Bombay High Court and a further appeal before the NCLAT, which are pending for hearing. One of PVL’s conditions for acquiring ARL through the IBC process was the continuation of its status as a listed company, which ceased to exist due to this order passed by the NSE and BSE. Meanwhile the statutory period by which PVL was required to complete the acquisition under the resolution plan has also expired.
Coming to PVL’s track record on the corporate governance front, the company has reportedly filed an application with Ministry of Corporate Affairs for condo-nation of delay under Section 460 of the Companies Act, 2013 to file fresh E-form MGT-14 in order to correct the inadvertent error caused in the copy of special resolution filed for conversion of loan into equity shares which was passed in extra-ordinary general meeting dated January 9, 2017. The application is pending for hearing. Also, there are outstanding legal proceedings involving the company, subsidiaries, promoter, certain directors and group companies. Litigations involving the company in respect of eleven tax proceedings, one each of criminal and civil matter reportedly aggregate to over Rs 75 Cr. This is the credibility of the promoter and his group.
Key Management
Promoter Pravin Kumar Agarwal (52) is the Chairman and Managing Director of the company. He is responsible for overall management of PVL and entire group including devising investment strategies, developing industry networks for further business development and overall development of the business.
Kingston Eric Mendes (47) is the Executive Director in-charge of the Hospitality division. He claims to have more than twelve years experience in hospitality industry having previously worked with Royal Palms (Gold & Country Club) and Golden Chariot Hospitality Private Ltd.
Venkateshkumar Tirupatipanyam (66), who had earlier worked with IDBI Bank, is an Independent Director. Perhaps through his connection the investment banker IDBI Capital might have been roped in as Book Running Lead Manager to PVL’s IPO. Priyanka Yadav (30), who is also a director of Artemis Electricals and Projects Ltd, has been appointed as Independent Director.
Non-Executive Director Ram Niranjan Bhutra (40), who is a member of the Institute of Chartered Accountants of India, reportedly provides guidance to PVL for operational issues and strategy planning for business development.
Stakeholders
Currently the promoter group is holding the entire equity capital Rs 31.99 Cr of which, individual promoter, Pravin Kumar Agarwal holds 63.69% (40.75 million shares). Post public issue the promoter group will hold 68.84% (56.62 million shares) of the enlarged equity capital of Rs 41.12 Cr at negative cost.
An aggregate of 20% of the equity share capital held by the promoter shall be locked in for a period of eighteen months and the promoter’s shareholding in excess of 20% shall be locked in for a period of six months from the date of allotment.
Business
According to the offer document, PVL, post incorporation in the year 2000, was managing and operating restaurants, lounges, retail outlets, food stalls, bars, staff canteens and food supply at various airports across the country. The knowledge and experience of providing these services laid the foundation of its hospitality vertical. The company developed two hotels in Mumbai viz., Golden Chariot Vasai Hotel & Spa and Golden Chariot, The Boutique Hotel near Mumbai International Airport and has been operating the hotels since fiscal 2015.
PVL reportedly expanded its hospitality operations into the restaurant space in Mumbai city by opening restaurants under the brand name Golden Chariot and Balaji. Their Restaurant Casablanca at Sahara Star, Mumbai commenced operations in the year 2017. The QSR business under the brand name Zebra Crossing, Hardy’s Burger and Mumbai Salsa were also launched in the year 2017. In November 2021, the company extended its Hospitality offering by undertaking the management and operations of Juvana Resort and Spa, a luxury resort at Aamby Valley, Lonavala developed by Golden Chariot Retreats and Infra Private Ltd. The company has reportedly been awarded with three Government Hotel Development Projects namely, Rajnagar Garhi Project, Pahadikhurd Project and Tara Resort Project in the State of Madhya Pradesh on DBFOT basis by way of a letter of award each dated November 4, 2022 from the Madhya Pradesh Tourism Board.
The knowledge and experience gained while developing the Mumbai hotels led the promoter to venture into the business of Civil Construction through, Garuda Construction, which has become PVL’s subsidiary since April 2, 2020. Garuda Construction provides end-to-end construction services for residential and commercial buildings. Garuda Construction is currently engaged in the Civil Construction of six residential projects for third party developers and promoter group in the MMR. As of March 15, 2023, the Garuda Construction’s third party developer order book was Rs 468 Cr.
PVL has been awarded two Government Projects i.e. development of a 16 MW hydropower plant at Halaipani in the State of Arunachal Pradesh and development of 42.42 acres entertainment centre at Ambazari, Nagpur. The aggregate cost for developing Hydro Power Project and Nagpur Project is estimated at Rs 214 Cr.
Financial Track
On the performance front, PVL has had a fluctuating past. In fiscal 2019, on Rs 160 Cr consolidated revenue, the company had an operating profit of just Rs 1.13 Cr. With the help of other income of Rs 8.23 Cr, it posted a net profit of Rs 2.46 Cr against a capital base of Rs 7.51 Cr. Fiscal 2020 saw the top line growing Rs 5 Cr but operating profit witnessed an increase of Rs 9 Cr and the company’s net profit turned out to be higher than its operating profit! In fiscal 2021 revenue leapt to Rs 242 Cr and net profit nearly tripled. Revenue dropped below Rs 200 Cr in fiscal 2022 but net profit increased to Rs 66 Cr. Net profits for the last five years have been higher than the company’s operating profits thanks to the hefty other income which largely consists of `Financial Income’ recognized on Contract Asset. But for these other income, the bottom line would have been in red.
|
PKH Ventures Consolidated Financials (in Cr) |
|||||
| Period Ended |
Dec-22 |
Mar-22 | Mar-21 | Mar-20 |
Mar-19 |
| Months |
9 |
12 | 12 | 12 |
12 |
| Revenue |
125.46 |
199.35 | 241.51 | 165.89 |
160.41 |
| Operating Profit |
35.09 |
52.97 | 50.52 | 10.30 |
1.13 |
| OPM% |
28.0 |
26.6 | 20.9 | 6.2 |
0.7 |
| Other Income |
29.58 |
46.05 | 23.15 | 3.12 |
8.23 |
| EBIDTA |
64.67 |
99.03 | 73.67 | 13.41 |
9.36 |
| EBIDTA % |
41.7 |
40.4 | 27.8 | 7.9 |
5.6 |
| Interest |
7.20 |
11.67 | 7.88 | 3.72 |
4.13 |
| Depreciation |
1.69 |
1.79 | 2.24 | 2.14 |
2.37 |
| Tax |
16.02 |
21.70 | 7.28 | 1.88 |
0.65 |
| Net Profit |
39.00 |
66.42 | 51.63 | 14.10 |
2.46 |
| Equity (Implied) |
41.13 |
31.99 | 7.99 | 7.51 |
7.51 |
| Reserves (Implied) |
902.60 |
612.87 | 494.21 | 141.90 |
127.82 |
| Borrowing |
172.01 |
98.24 | 82.95 | 23.87 |
26.05 |
| Fixed Assets |
372.60 |
374.00 | 375.20 | 47.80 |
45.30 |
The company’s standalone performance is also far from convincing. Net profit, which was close to Rs 12 Cr in fiscal 2021, plummeted to Rs 5.36 Cr in fiscal 2022. The bottom line plunged into red in the first 9-month period of fiscal 2023. No wonder that the company has not paid any dividend till date. Strange but true, PVL does not own its Registered Office and has taken the same on leave and license basis from the loss-making maiden public venture of the group, Artemis Electricals and Projects Ltd!
|
PKH Ventures Standalone Financials (in Cr) |
|||||
| Period Ended |
Dec-22 |
Mar-22 | Mar-21 | Mar-20 |
Mar-19 |
| Months |
9 |
12 | 12 | 12 |
12 |
| Revenue |
38.46 |
76.82 | 120.96 | 161.75 |
160.06 |
| Operating Profit |
5.83 |
5.74 | 16.58 | 10.88 |
1.77 |
| OPM% |
15.2 |
7.5 | 13.7 | 6.7 |
1.1 |
| Other Income |
0.13 |
3.89 | 4.34 | 2.45 |
7.76 |
| EBIDTA |
5.97 |
9.62 | 20.93 | 13.33 |
9.52 |
| EBIDTA % |
15.5 |
11.9 | 16.7 | 8.1 |
5.7 |
| Interest |
2.79 |
3.69 | 3.23 | 3.7 |
4.13 |
| Depreciation |
1.06 |
1.39 | 1.85 | 2.01 |
2.22 |
| Tax |
-0.27 |
0.41 | 4.13 | 1.87 |
0.65 |
| Net Profit |
-0.53 |
5.36 | 11.78 | 4.99 |
2.24 |
| Equity (Implied) |
41.13 |
31.99 | 7.99 | 7.51 |
7.51 |
| Reserves (Implied) |
491.85 |
231.29 | 249.92 | 82.61 |
77.63 |
| Borrowing |
28.14 |
36.90 | 25.00 | 23.27 |
26.10 |
| Fixed Assets |
176.70 |
177.70 | 179.70 | 31.30 |
33.00 |
Valuation
The group’s loss-making public venture (AEPL) is currently commanding a market cap of more than Rs 425 Cr. PVL which has a larger asset base is aiming a market cap of over Rs 1200 Cr. The reported financials of PVL may perhaps justify the IPO valuation. But, what’s frightening the track record of the promoter’s maiden public venture.
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HOW PKH VENTURES COMPARES WITH STABLEMATE |
||
|
Financials |
||
| (Amount in Cr) |
PKH Ventures |
Artemis Elect |
| Market Cap |
1217 |
427 |
| Borrowing |
172 |
33 |
| Fixed Assets |
373 |
30 |
| Revenue |
167 |
36 |
| Other Income |
39 |
0 |
| EBIDTA |
86 |
6 |
| Interest |
10 |
10 |
| Net Profit |
56 |
-3 |
| Equity Cap |
41 |
25 |
| Reserves |
903 |
44 |
|
Stock Features |
||
| Current Price (Rs) |
148 |
17 |
| Face Value (Rs) |
5 |
10 |
| Book Value |
115 |
28 |
| Promoter Stake % |
68.84 |
72.23 |
| Debt/Equity |
0.2 |
0.5 |
|
Profitability |
||
| OPM % |
28.0 |
17.6 |
| Net Margin % |
27.1 |
– |
| Earnings Per Share |
5.13 |
– |
|
Discounting |
||
| Price/Earnings |
28.9 |
– |
| Price/Book Value |
1.3 |
0.6 |
| Price/EBIDTA |
14.1 |
6.9 |
| Price/Revenue |
7.3 |
1.2 |
| Price/Fixed Assets |
3.3 |
1.5 |
|
Distribution |
||
| Dividend % |
0 |
0 |
| Yield % |
0 |
0 |
| Pay-out % |
0 |
0 |
Concern
- The public company PVL has entered into several revenue sharing agreements with the Promoter and Group Companies which could be detrimental to the public company’s profitability. While the operations may end up in loss for the public company, the agreements provide assured revenue for the promoter group.