Change of promoters on the eve of IPO, excessive private placements, unjustifiable diversification, diversion of funds to unrelated activities, hand-in-glow arrangements dent image.

The two decade-old Unishire Urban Infra Ltd is making a fresh issue of 64.3 lakh shares of Rs 10 each at par value aggregating to Rs 6.43 cr. In the post-IPO equity of Rs 24.36 cr, the promoters will have an unassuming stake of less than 27%. The offer makes an easy exit route for the so called public shareholders who have been trapped for years with 43% of the enhanced capital!   

OFFER AT A GLANCE
Issuer Name	Unishire Urban Infra Ltd
Offer Amount	Rs 6.43 cr
Offer Quantity	64.3 lakh shares of Rs 10 each
Offer on Total Equity	26.4%
Post-issue Promo stake	26.7%
Post-IPO Capital	Rs 24.36 cr
Offer Price	Rs 10
Application Quantity	10,000 & Multiples of 10,000
Offer Opens	February 10, 2014
Offer Closes	February 12, 2014
Listing	SME Platform of BSE
Rating	Nil
Lead Manager	Inventure Merchant Banker
Market Maker	GCM Securities
Registrar	Purva Sharegistry

Of late, the regulators themselves seem to have forgotten the rules that they have formulated! For instance, private placements with public investors are completely banned by SEBI. Yet, between 2003 and 2012, the Kolkata-registered Ratna Kamal Holdings Ltd collected more than Rs 5 cr as share premium from 330-odd public shareholders, including 74 HUFs!

In fact, the company, which had never earned more than just Rs 26000 in a year, priced its Rs 10 paid-up share in March 2012 as high as Rs 1000!  The loss-making company made a bumper 17:1 bonus issue utilizing the premium collected though private placements and the original promoters sold their stake at a profit to a new set of promoters who acquire the shares at par value!

How more than 260 individuals and 74 HUFs were roped in as public investors without the knowledge of the regulator?  Also, when the average cost to the investors in March 2012 works out to more than Rs 55, how the new promoters were allowed to subscribe at Rs10?

Coming to BSE, in the past, the exchange has refused to acknowledge many a listed entity’s name change reasoning that the new name did not corroborate to its current activity. In Unishire’s case, though the company is currently engaged in securities trading and investment activity, BSE has allowed the company to be listed on the SME platform under a name that sounds like an infrastructure company. Originally incorporated as ‘Ratna Kamal Holdings 1991, the company changed the name to Unishire Urban Infra Limited on the eve of the public issue, in 2013.

For more than two decades the company hardly achieved anything to speak about. But, that did not deter the Bangalore-based Mehta family from taking over the company in September 2013. The Mehtas claim to have pumped in Rs 6.5 cr to gain control of about 27% on the enlarged equity and promise to take the company into real estate development in the state of West Bengal. Nevertheless, the fact is, they already have umpteen number of real estate entities whose track record is far from convincing. Also, when they have more than a dozen closely-held companies engaged in similar business, what great can one expect from a company in which the promoters hold less than 27%?

 

Manager’s Track

For the Mumbai-based Inventure Merchant Banker, Unishire is the sixth IPO from the `City of Joy’! The only IPO managed by them outside Kolkata is VKJ Infra from New Delhi. Another interesting aspect of the investment banker is that the IPOs managed by Inventure were either `Infra’ companies by name or `Trading’ by nature! Of the previous six SME IPOs brought out by Inventure, only GCM Securities Ltd (GSL) is currently commanding a fabulous premium of 1400% over its offer price.

What’s intriguing is, GSL has posted 86% drop in top line and 93% fall in bottom line in the current fiscal. First six months’ profit amounted to just Rs 20 lakh as compared to its equity base of Rs. 19 cr. Yet, the Rs 10 paid-up share is quoted above Rs 300! Incidentally, while the merchant banker has underwritten only 15% of Unishire’s IPO, GSL has committed 85% (Rs 5.5 cr)! If GSL’s market performance is anything to go by, Unishire too may shine well as GSL is going to act as a market maker. But, how will one justify exorbitant premiums without a financial record to boot?  It is high time the regulators wake up from their slumber and discipline the unscrupulous elements who are playing havoc on the SME platform of BSE.      

IPOs MANAGED BY INVENTURE MERCHANT BANKER
ISSUER NAME	IPO		CURRENT
	DATE	PRICE	PRICE
BRONZE INFRA-TECH	19-Oct-12	15	14.70
GCM SECURITIES	18-Mar-13	20	302.00
GCM COMMODITY	1-Aug-13	20	11.50
SILVERPOINT INFRATECH	12-Aug-13	15	7.10
VKJ INFRADEVELOPERS	12-Aug-13	25	35.60
NEWEVER TRADE WINGS	30-Sep-13	10	30.00