Yet another `scientific’ IPO that lacks ‘chemistry’!
Even while there is a drought-like situation on the `main frame’ section of the primary market, a little known investment banker from Kolkata, Guiness Corporate Advisors, has created a record of sort by bringing out as many as five IPOs in less than three months. Incidentally, all the five issues have gone to the SME Platform of BSE. What’s disturbing is the quality of these IPOs. It is indeed a sad commentary on the market regulators that they have turned a blind eye to these IPOs which are quite likely to join the `vanishing companies’ list sooner than later!
A close look at the `stereo-type’ features of the issues managed by Guiness give enough indications that the issuers and the manager have perfectly cooked up the `fundamentals’ to enable them to raise public money. What commitment do the promoters of these companies have can be gauged from their post-issue stake. None of the issues managed by Guiness has a promoter-stake of even 25%! A scrutiny of the pre-issue build-up of the capital, their pricing and profile of the holders amply demonstrate that our regulators are utterly incompetent to guide and protect the investing public.
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IPOs MANAGED BY GUINESS CORPORATE |
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ISSUER |
IPO |
IPO |
EQUITY |
PROMO |
IPO |
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DATE |
Rs Cr |
Rs Cr |
STAKE% |
PRICE |
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RCL Retail |
27-Sep-12 |
5.80 |
12.30 |
22.56 |
10 |
|
Eco Friendly Food |
27-Dec-12 |
7.52 |
9.89 |
20.40 |
25 |
|
Esteem Bio Organic |
18-Jan-13 |
11.25 |
14.90 |
20.60 |
25 |
|
Sunstar Realty |
18-Feb-13 |
10.62 |
19.93 |
22.25 |
20 |
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Channel Nine |
22-Feb-13 |
11.67 |
15.51 |
20.61 |
25 |
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HPC Biosciences |
01-Mar-13 |
15.75 |
15.90 |
22.01 |
35 |
Let us take the case of HPC Biosciences. The company has drawn a capital expenditure plan for less than Rs 15 cr. But, it makes an IPO for Rs 15.75 cr! In other words, the promoters want to have easy funding without accountability though the promoters will have a minority stake of just 22% in the post-issue capital of Rs 15.90 cr. Incidentally, HPC is the third ‘organic farming’ IPO in as many months brought out by the same investment banker.
Interestingly, all the three companies are operating in and around the same location in the state of Uttarakhand. What’s more, though their names sound like ‘biotech’ or ‘organic food’ companies, all the three are actually engaged in ordinary agriculture activities cultivating wheat, paddy, sugarcane, etc., besides wood plantation! None of the proposed projects is appraised or funded by any bank or institution.
None of the companies is in dividend list, nor have they any credible financial record to speak about. Only on the eve of the issue their operations bloomed. Most of them took hefty premium from ‘public’ investors through private placements and virtually wiped out the premium by issuing bonus shares just before floating the IPO. The bonus shares significantly reduced the cost of Promoters’ holding which is already abysmally low. In other words, the public fund is left with promoters’ who have very little financial commitment towards the companies. Can the investing public expect great returns from such promoters?
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PROJECT/COST COMPOSITION OF GUINESS-MANAGED IPOs |
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Company Name |
Eco Friendly Food |
Esteem Bio Organ |
HPC Bio Sciences |
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IPO Project |
Organic Farming |
Organic Farming |
Organic Farming |
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Location |
Uttarakhand |
Uttarakhand |
Uttarakhand |
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Project Cost |
Rs 745.50 lakh |
Rs 1055 lakh |
Rs 1495 lakh |
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Land Development |
Rs 506 lakh |
Rs 565 lakh |
Rs 790 lakh |
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Green House/Sheds |
Rs 114 lakh |
Rs 380 lakh |
Rs 327 lakh |
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Farm Equipments |
– |
Rs 30 lakh |
Rs 38 lakh |
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Fencing/Suply Chain |
Rs 65.50 lakh |
– |
Rs 250 lakh |
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Brand Bldg/Others |
Rs 60 lakh |
Rs 80 lakh |
Rs 100 lakh |
The Offer
HPC is making a fresh issue of 45 lakh shares of Rs 10 each at a fixed price of Rs 35 a piece aggregating to Rs 15.75 cr. Of the IPO, 2.32 lakh shares are reserved for the `market makers’ to the issue, Narayan Securities. The entire issue has been underwritten by the lead-manger, Guiness Corporate. Subscribers must apply for a minimum of 4000 shares (Rs 1.4 lakh) and multiples thereof.
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OFFER AT A GLANCE |
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Issuer Name |
HPC Biosciences Ltd |
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Offer Amount |
Rs 15.75 cr |
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Offer Quantity |
45 lakh shares of Rs 10 each |
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Offer on Total Equity |
28.3% |
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Post-issue Free Float |
77.99% |
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Post-issue Promo stake |
22.01% |
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Post-IPO Capital |
Rs 15.90 cr |
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Offer Price |
Rs 35 |
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Application Quantity |
4,000 & Multiples of 4,000 |
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Offer Opens |
March 1, 2013 |
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Offer Closes |
March 5, 2013 |
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Listing |
SME Platform of BSE |
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Rating |
Nil |
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Lead Manager |
Guiness Corporate |
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Registrar |
Cameo Corporate |
Valuation
The decade-old HPC is offering the shares at a price of Rs 35 a piece. For its age, the price may look cheap but, its financial record speaks something different. Until March 2011, this company did not have a turnover of even a lakh. For fiscal 2012, it reported an income of Rs 2.90 cr and posted a profit of Rs 3.05 cr! For the 8-months ended up to November 2012, on a turnover of Rs 3.64 cr, it netted a profit of Rs 2.95 cr. A question that arises here is, if Indian agriculture is so profitable, why so many farmers are committing suicide in the country?