Bharatiya Global Infomedia: Same promoter has already tapped the capital market not once but thrice. But neither Sebi, nor the rating agency, or the investment banker is bothered about the plight of the investing public who had subscribed to those three IPOs. What’s more the promoter now presents himself as if he is going public for the first time. It’s high time Sebi wakes up from its slumber and tighten its vigilance mechanism!

OFFER AT A GLANCE
Name	Bharatiya Global Infomedia Ltd
Offer Quantity	67.2 lakh shares of Rs 10 each
% on Total Equity	42.42%
Offer Amount	Between Rs 50.4 cr and Rs 55.1 cr
Offer Price	Rs 75 to Rs 82
Bid Quantity	75 & Multiples of 75
Bid/Offer Opens	July 11, 2011
Bid/Offer Closes	July 14, 2011
Rated By	CARE
Rating	2 out of 5
Lead Managers	Almondz Global Securities
Registrars	Karvy Comutershare

 

The IPO 

The present IPO is a fresh issue of 67.2 lakh equity shares of Rs10 each made in the price band of Rs75 – Rs82 a piece amounting to Rs 50 cr to Rs 55 cr. The public offer amounts to 42.4% of the company’s post-IPO equity.

 

Issue Objective

The main objects of the IPO are: to purchase an office at Noida and re-locating the branch office in Mumbai (aggregate cost Rs 9.9 cr); upgrading digital post-production studio (Rs 22.04 cr); expansion of R&D centre (Rs 6.57 cr); retiring bank loans (Rs 2.7 cr); meeting working capital (Rs 5.05 cr) and the balance amount is earmarked for general corporate purposes.

 

Parentage

Bharatiya Global Infomedia Ltd (BGIL) presents husband and wife Rakesh Bhhatia and Arti Bhatia as promoters and the offer document lists BGIL Films and Technologies Ltd as the only listed company of the promoters. Has the regulating authority Sebi or the rating agency CARE or the lead manager Almondz Global verified the facts?

The main promoter of BGIL, Rakesh Bhhatia, is not new to investing public. He came to the market for the first time during the height of the primary market boom in the mid nineties. At that time he used to spell his name as `Raakesh’. He was part of the Delhi-based “SRG group” whose flagship, SRG Financial & Management Consultants were category-1 registrars and transfer agents. According to knowledgeable sources the name SRG was the acronym of Sunil (Agarwal), Raakesh (Bhhatia) and Gopal (Chandra Sharda) who were instrumental in forming the SRG group.   

The “SRG group” tasted public money first in June 1994 with a small issue Rs 1.63 cr under the banner SRG Finman India Ltd. This company proposed to diversify into the activities of registrars (group flagship’s main business!), software development and exports and computer education. 

In 1995, SRG Finman, after changing its name to SRG Infotec, floated a much larger convertible debenture issue of Rs 39.90 cr on rights basis. The company claimed to have received full subscription. But, the regional stock exchange at Delhi refused to list the debentures on the grounds that the company had not received 90% subscription! Finally, the company was asked to refund the money! 

Having failed in its second attempt under SRG Infotec, Raakesh Bhhatia and Sunil Agarwal brought SRG Financial Management (group flagship) to public to get into the then buoyant business of NBFC! Whereas SRG Finman had charged a premium of Rs 5 per share in 1994, SRG Financial offered at a premium of Rs 10 per share and collected Rs 5.1 cr.

Four years later (towards the end of 1999) when the primary markets witnessed another boom, a little known Bangalore-registered, but Delhi-head-quartered, Visesh Infosystems Ltd (VIL), hit the capital market a public issue of 27.75 lakh shares of Rs 10 each at price of Rs 50 a piece, aggregating to Rs 13.87 cr.

The offer document of VIL did not specify who the main promoter was. It merely said that J K Bhatia was the chairman of the company. It read that Raakesh Bhhatia, the chairman and managing director of VIL resigned in August 1999 “for some personal reasons”, and his brother J.K. Bhatia joined as chairman!

Though SRG Financial was the largest shareholder of VIL prior to its public issue and  Raakesh Bhhatia and his SRG group were not new to the capital markets, VIL’s offer document claimed that there were “no other ventures/firms/companies promoted by the promoters”!

Like in VIL, an impression is sought to be created in BGIL too that Rakesh Bhhatia has not raised any public money before (as a promoter). But the fact is, the companies that are now claimed as BGIL promoters’ group held more than 50% of VIL when the latter’s offer document was filed with ROC.

What’s more interesting is, BGIL’s offer document claims that the original promoters of the company were Karun Jain and his wife Monica, and Rakesh Bhhatia took over BGIL from them. Incidentally, the same Karun Jain was presented as promoter-director along with Rakesh brother, J K Bhatia, in Visesh IPO document! Before coming to VIL Karun Jain was an `executive’ of SRG Infotec! Capital market regulator Sebi may not remember its own ruling passed many years ago. But, Rakesh Bhhatia and his associates cannot escape from the investing public’s memory.

 

Business

As in the past, the promoters are once again using their pet `IT’ name for raising public money.  BGIL claims to focus on information technology security and compliance automation software solutions besides digital post-production studio operations. Its IT division reported a turnover of Rs 68.5 cr in fiscal 2011. The offer document does not provide the break-up of the IT revenue. However, if the value of purchases (Rs 56.4 cr) is any indication, the company’s current operations are more of trading than anything else.

Interestingly BGIL’s group company in the listed domain viz. BGIL Films & Technologies Ltd (BFTL) proposed to take over the digital post-production studio operations, digital signage division and film production division of BGIL in 2009 and its share price shot up to over Rs 100 from below par! This Proposal is reportedly pending with the Court. BFTL is currently thriving on trading of hardwares.    

 

Prospects 

First public company of Rakesh Bhhatia, SRG Finman, changed its name to SRG Infotec and then to Pan India Corporation. This company’s equity has bulged to over Rs 214 cr but, investing public has not benefited. The shareholders have not received even the annual reports for years. When there is no corresponding increase in earnings, why one should hike the equity to such high level? Are the promoters converting their black money into white through the equity route? It is a fit case for CBI and DRI to look into.

The promoter’s second public company, SRG Financial Management, which changed its name into Proline Software & Finance Ltd, is not heard of on the trading floor. This company too has not sent the annual reports to shareholders many years.

Third pubic company’s name was changed to Visesh Infoteinics and its equity too increased to over Rs 63 cr without a corresponding increase in earnings. This scrip is currently languishing at less than one-fifth of its IPO price. Visesh has not sent any annual report to shareholders after 2005!  

Fourth listed company of the promoter, formerly known as Nam Credit & Investment Consultants Ltd, incidentally whose registrar to the issue was SRG Financial, made big claims in fiscal 2008-09 after changing its name into BGIL Films which saw the share price rocketing from below par (Rs 9) to Rs 108! Currently, it is in the dumps at less than Rs 4. This company has not sent the annual report for fiscal 2010 till date.

The above four experiences give enough indication what is in store for the investors of BGIL. These four companies changed their names after going public. But, BGIL has already changed its name thrice even before the IPO! What’s more, the company changed its registered office as many as 8 times in 10 years!! In a same month it has changed the office twice!!!

 

Lead Manager’s dismal record

Another interesting aspect of this IPO is SRG group’s first issue lead manager is the book running lead manager for BGIL. Earlier the investment banker was known as Allianz Capital which was subsequently changed to Amondz after courting a controversy. What’s the track record of IPOs managed by Almondz?

Of the 13 issues lead-managed by Almondz in recent years, as many as 11 have inflicted losses on investors. These eleven companies collected nearly Rs 813 cr from the public whose market value is only Rs 208 cr today. In other words, more than 74% of investment value has gone into the drain.  

Loss suffered by investors in Almondz lead-managed IPOs since 2005
Sl.	(Amount in Cr)	Issue	IPO	IPO	Current	Current	Gain/Loss
No.	Issuer	Date	Price	Value	PRICE	Value	Amount	%
1	Alpa Laboratories	12-Jul-07	68	64.60	9.71	9.22	-55.38	-85.7
3	Anu’s Laboratories	12-May-08	21	80.22	3.16	24.14	-56.08	-69.9
4	Bang Overseas	28-Jan-08	207	72.45	35.55	12.44	-60.01	-82.8
5	Broadcast Initiative	9-Feb-07	120	102.60	10.36	8.86	-93.74	-91.4
6	Empee Distilleries	1-Nov-07	400	192.00	101.35	48.65	-143.35	-74.7
7	Evinix Accessories	12-Feb-07	12	42.00	1.00	3.50	-38.50	-91.7
8	FCS Software	22-Aug-05	5	17.50	0.82	5.74	-11.76	-67.2
9	First Winner Indust	9-Jun-08	125	68.75	19.40	10.67	-58.08	-84.5
10	Omkar Speciality	24-Jan-11	98	79.38	69.45	56.25	-23.13	-29.1
12	Texmo Pipes	16-Feb-10	90	45.00	35.65	17.83	-27.18	-60.4
13	Tulsi Extrusions	1-Feb-08	85	48.45	17.05	10.69	-37.76	-77.9
				812.95		208.00	-604.95	-74.4
Price and Value adjusted to stock-splits and bonus issues