Fit case for SEBI to interfere and put an end to BSE-SME Platform becoming a `breeding clinic’ for scamsters!
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OFFER AT A GLANCE |
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Name |
Monarch Health Services Ltd |
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Offer Quantity |
15 lakh shares of Rs 10 each |
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Post-IPO Public Holding |
74.9% |
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Offer Price |
Rs 40 |
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Offer Amount |
Rs 6 cr |
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Application Quantity |
2500 & multiples of 2500 |
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Offer Opens |
May 12, 2012 |
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Bid/Offer Closes |
May 16, 2012 |
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Listing |
SME Platform of BSE |
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Rating |
Nil |
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Lead Managers |
Networth Stock Broking Ltd |
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Registrars |
Sharepro Services |
Issue Details
The Mumbai-based Monarch Health Services Ltd (MHSL) proposes to offer public 15 lakh equity shares of Rs 10 each at a fixed price of Rs 40 a piece aggregating to Rs 6 cr. Of the public portion, 3 lakh shares are reserved for the market maker. The shares are proposed to be listed on the SME Platform of Bombay Stock Exchange (BSE). Minimum subscription for the retail applicant is 2500 share that is Rs 1 lakh.
Issue Object
The company proposes to come out with a chain of 100 skin care and cosmetic clinics across India in the next four years. It claims to have already commenced operations in two clinics in Mumbai and plans to commence operation in three more clinics -one each in Delhi (in April 2012), Goa (in May 2012) and Haridwar (in latter half of 2012) with the funds raised prior to the public issue.
With the funds to be raised through the present issue and promoters’ contribution aggregating to Rs 12 cr the company proposes to set up another twenty three clinics (7 in Tier I Cities, 8 in Tier II Cities and 8 in Tier III Cities) during the year 2012-13.
People Behind
According to the IPO document, MHSL was incorporated in October 2011 by the Mumbai-based cosmetologist Dr. Nishita Sheth along with dermatologist Dr. Prashant Vikram and they were later joined by the Pune-based surgeon Dr. Ajit Kadam. But, ironically, at the time of signing the offer document, the so called promoters held less than 12% of the then capital! Knowledgeable sources reveal the broking arm of the company’s investment banker had canvassed for subscription (under the guise of private placement) and roped in more than 60 high net worth investors to stake in the pre-issue equity capital. Surprisingly, the promoters have chosen to hold only just 25% in the post-IPO equity of Rs 6 cr.
If the market sources were to be believed, Monarch Health is an extended arm of the company’s merchant banker, Networth Stock Broking Ltd. When incorporated in October 2011, Monarch Health had its registered office at the same building Networth Stock is housed. Interestingly, before the incorporation of Monarch Health, the investment banker had two companies in the name of Monarch viz. Monarch Research & Brokerage Private Ltd and Monarch Project & Finmarkets Ltd, which were merged with Networth Stock last year. Pritesh Doshi, executive director of Monarch Health was earlier working with Monarch Project & Finmarkets as a “dealer”. What’s more, Networth’s director Sanjay Motta is the auditor of Monarch Health!
While Monarch Health’s so called compliance officer, Priyanka Manghwani, is not sure of the identity of the company’s auditor, a junior staff of the company is confidently saying that Monarch Health and Monarch Project belong to the same group! And who is the real owner of the group? Knowledgeable sources vouch that the group is backed by the infamous Kolkata broker, Ajay Kayan of SMIFS Capital, who was in fact a director of Networth till 2010.
Valuation
Even though MHSL is asking a premium three times its face value, the eight-month old company is yet to find a footing on the operational front. For the period between October 2011 and March 2012 the company posted a revenue Rs15 lakh and incurred a loss of Rs 44 lakh. Looking at the company’s background one cannot be optimistic about its future. The so called promoter-doctors have got the shares at par value (Rs10). The promoters’ overall cost of holding works out to less than Rs 34 for their 25% stake in the company while public shareholders would shell out Rs 40 a piece.
Concerns
- Company with dicey fundamentals
- Uninspiring stake by the promoters
- Conflict of interest with promoters and their group companies
- Net worth of promoters’ existing companies fully eroded
- IPO designed to help select cronies of the investment banker!