Group IPO record speaks!

OFFER AT A GLANCE
Name	Birla Pacific Medspa Ltd
Offer Quantity	5.93 to 6.52 Cr Shares of Rs 10 each
% on Total Equity	56 to 58%
Offer Amount	Rs 65.18 cr.
Offer Price	Rs 10 to 11
Bid Quantity	500 & Multiples of 500
Bid/Offer Opens	June 20, 2011
Bid/Offer Closes	June 23, 2011
Rated By	Brickworks Ratings
Rating	2/5
Lead Managers	Arihant Capital
Registrars	Adroit Corporate

 

The IPO 

The present IPO is a fresh Issue of Equity Shares of Rs10 each aggregating to Rs 65.175 cr. The offer is being made in the price band of Rs10 – Rs11 a piece. Thus, the issue quantum would be around 6.52 cr shares or 5.93 cr shares depending on the offer price which translates into 58% or 56% of the company’s post-IPO equity.

 

Issue Objective

The main objects of the IPO are to fund the capital expenditure towards establishing 55 spa centers across the country (Rs 49.50 cr), brand promotion (Rs 6 cr) and working capital for running the spa centers (Rs 0.7 cr).   

 

Parentage

The issuer Birla Pacific Medspa Ltd (BPML) was originally promoted as an equal joint venture between Yash Birla Group company viz. Birla Wellness & Healthcare Private Ltd and the Singapore-listed Pacific Healthcare Holdings Ltd (PHHL) along with Dr. Abhijit Desai, a dermatologist who is a shareholder-director of the Mumbai-based PacHealth Medical Services Private Ltd (PMSPL) promoted by PHHL and Dr. Desai. 

However, the joint venture agreement has been scraped subsequently and BPML’s ownership pattern has undergone a major change. Currently Birla Wellness controls 64.3% of the company’s present equity of Rs 46.97 cr. Pacific Healthcare (Singapore) and PMSPL (Mumbai) hold 7.2% and 5.2% respectively as non-promoters. Media giant Bennett, Coleman & Company has staked in 22.8%.         

 

Business

The company operates medical wellness (med spa) centres under the brand name `EVOLVE’. A med spa is a hybrid between a medical clinic and a day spa and operates under the supervision of a medical doctor.  Each med spa centre is designed to offer scientific makeover solutions for enhancing one’s beauty. Using the state-of-the-art equipments the centre provides patient-centric solutions for safe treatment.

All consultations and procedures are carried out with utmost privacy and in pleasant, comfortable and specially designed rooms. Thus the Evolve Medspa is a one-stop centre offering latest in medical related beauty treatments under cosmetic surgery, cosmetic dermatology and advanced dentistry.    

 

Growth Prospects 

Even though the `Wellness’ space in India is still at a nascent stage as compared to international markets, it is projected to grow impressively in the next five years. The growth drivers of this industry are the increasing consciousness of one’s looks along with desire for quick-fix solutions and growing influence of western lifestyle.

BPML currently has five self-owned med spa centres in Mumbai and two franchisee-owned clinics at Thane and Chennai. The company now proposes to set up additional 55 centres across Tier I and Tier II cities in India. The prospects are no doubt good. But, will BPML deliver?

 

Disappointing Track 

The existing business of the company was taken over from PMSL for a consideration of Rs 4.10 cr in November 2008.  Since then the company has accumulated losses to the tune of Rs 11.53 cr till December 2010. The company’s present top line is abysmally low at Rs 1.65 cr for nine months as against its existing equity base of about Rs 47 cr. Given the current scenario, when and how BPML will service its huge post-issue equity capital of more than Rs 110 cr is anybody’s guess.

 

Concerns

• Frightening track record of Yash Birla group IPOs – three-fourths (75%) of the investors’ money gone in the wind
• Pathetic profitability of the group companies
• Group’s poor track record of project implementation
• Two of the group companies already referred to BIFR
• Project of Rs 65 cr has not been appraised by any external agency and the deployment of the fund is entirely at the discretion of the management
• Present IPO graded as below average

 

Yash Birla Group IPO History

Between 2006 and 2010 the Yash Birla group floated as many as five public issues whose present plight will certainly advise investors to keep away from Birla Pacific Medspa. The group’s flagship has inflicted a capital loss of more than 87% and its most recent IPO is currently languishing at 70% lower than the offer price.

YASH BIRLA GROUP POST-IPO RECORD
COMPANY	ISSUE DATE	FV	IPO PRICE	IPO AMT	CUR PRICE	CUR VALUE	GAIN/ LOSS
		Rs	(Rs)	(Rs Cr)	(Rs)	(Rs Cr)	(Rs Cr)	%
Birla Power	24-Mar-06	1	4.20	50.40	1.00	14.40	-36.00	-71.4
Zenith Birla	16-Oct-06	10	55.00	131.00	7.07	20.21	-110.79	-84.6
Birla Machin	27-Aug-07	10	45.00	18.03	8.55	3.43	-14.60	-81.0
Birla Cotsyn	30-Jun-08	1	1.40	144.18	0.51	63.03	-81.15	-56.3
Birla Shloka	11-Jan-10	10	50.00	34.78	14.75	10.26	-24.52	-70.5
TOTAL				378.39		111.32	-267.07	-70.6

N.B.: Price adjusted to post-issue stock-splits   

 

Valuation 

Though wellness industry may command a better discounting than the market composite, in the absence of any credible financial track record even a par value may prove very costly for the BPML IPO investors.

DESCRIPTION	M-CAP	P/E	P/BV	P/FV	P/R	OPM	YIELD	PRICE
	(Rs Cr)	(X)	(X)	(X)	(X)	%	%	(Rs)
Market Composite	6,588,308	17.1	2.6	32.1	1.7	22.9
Talwalkars	582	37.5	4.5	24.1	6.7	41.6	0.2	241.15
Birla Pacific-Hi Band	117	0	1.1	1.1	53.4	0	0	11.00
-Low Band	112	0	1.1	1.0	51.3	0	0	10.00