whose aggregate profit in five years was only Rs 46 lakh, is enlarging its capital base from Rs 22 lakh to Rs 16.43 cr. How will it service such a large equity? “Dividend does not matter for IPO-investors”, says the merchant banker’s representative!
People invest in equities either for capital appreciation or dividend yield. Both capital appreciation and dividend prospects are solely dependent on a company’s earnings. Nevertheless, for SME investors in our country, earnings or dividends do not seem to matter!
Whereas the SMEs listed on the NSE are languishing below issue price despite having attractive earnings and dividends, most of the BSE-SMEs are quoting at fabulous premiums without any basis. And, our market regulators do not seem to bother about such anomalies. Thus, those who have the manipulating skill are playing havoc on the BSE-SME platform.
Coming to the present issue, Anisha Impex Ltd (AIL) is the fifty-third SME to hit the BSE platform. The 14-year-old AIL is making a fresh issue of 65 lakh shares of Rs 10 each at par aggregating to Rs 6.50 cr. While the investment banker, Inventure Merchant Banker, has underwritten only Rs 1 cr (15.75%), a little known Ghaziabad based BSE broker, Share India Securities, who acts as a market maker for the first time, has committed as much as Rs 5.50 cr (84.25%). In the post-IPO equity of Rs 16.43 cr, the promoters will hold 36.7%.
Background
The Delhi-registered AIL was promoted by Sunil Kumar Malik (42) in November 1999. Initially (between 1999 and 2005) the company reportedly undertook `fabrication of various products’. In FY 2006 it entered into the business of import and export of fabrics. Since fiscal 2009, the company has concentrated on fabrics trading. Currently, AIL claims to trade a wide range of home textiles – fabrics for bedding, windows dressing, decorative, pillows, table linen, kitchen linen and other home furnishing.
The company claims to participate in auctions carried out by authorized agents of customs/ports authorities and buy the confiscated textile materials auctioned by them. AIL claims to get the materials at a cheaper rate from these auctions and sell the same to select corporate and other clients in various spheres of textile industry. Its customers include Alps Industries Ltd, Argon Denims Ltd, BBD Traders (P) Ltd, Faishons Flasher India (P) Ltd and Nagar Handloom (P) Ltd.
Financial Track
After 10 years of existence, AIL posted a top line of Rs 33 cr in fiscal 2009. Since then the company has been struggling to sustain its growth. Sales declined to Rs 21.50 cr in 2011 which has rebounded to Rs 34 cr in 2013. Even while the company’s top line looked decent, the operating margins were pathetic. Despite its claim of getting cheap custom-confiscated materials through auction, the company’s operating margin never crossed 2% in last five years. What’s more, save 2010, the company’s operations resulted in negative cash flow.
Until 2013, AIL had netted a maximum profit of only Rs 12 lakh in a year which, though appeared miniscule on a turnover of Rs 30 cr plus, yielded an EPS of more than Rs 5 on a then tiny capital of Rs 22 lakh. After a super bumper 20:1 bonus issue in November 2013 and private placements/preferential allotments in December 2013/January 2014, the equity base increased to Rs 9.93 cr which will be enlarged to over Rs 16 cr before the end of this fiscal through the IPO.
Against the proposed capital of Rs 16.43 cr, AIL’s bottom line for the 9-month period (up to December 2013) stood at just Rs 7.39 lakh! With such a pathetic track record of profitability how will the company service the large capital base is anybody’s guess. It is worth mentioning here that some of AIL’s group companies too are engaged in the same line of business who could have conflict of interest with the public company.
Concern
AIL’s investment banker has so far brought out eight SME IPOs to the BSE platform. Of these, four were trading companies, three were sub-contractors and one was into stock broking. Interestingly, many of these IPOs are quoting at a premium despite having no worthwhile fundamentals to speak about. What’s more disturbing is, the so called market-makers are allowed to have a free run on the BSE resulting in many a SME commanding fabulous premium without any basis.
The last two IPOs managed by Inventure Merchant Banker have a lot of similarities. Unishire, which had never earned more than just Rs 26000 in a year from trading of securities, priced its Rs 10 paid-up share in March 2012 as high as Rs 1000! While making loss, the company made a bumper 17:1 bonus issue utilizing the premium collected though private placements. Even while raising funds through private placements from non-promoter-individuals is banned in the country, Unishire roped in 260 individuals and 74 HUFs as investors before going public. When there was no visible bottom line, Unishire expanded its capital from just Rs 29 lakh to over Rs 24 cr!
Like Unishire, when there was no earnings to support, AIL too priced its share Rs 1000 in March 2012 and collected nearly Rs 4 cr premium which was fully capitalized through an ultra liberal 20:1 bonus issue. Following Unishire’s steps, AIL collected about Rs 4 cr from 50-odd ‘public’ investors through unauthorized private placements. Also, like Unishire, when the bottom line is too thin to service even a small equity, AIL is enlarging its capital from Rs 22 lakh to over Rs 16 cr. The promoters are minority shareholders in both Unishire and AIL.
AIL’s offer document reveals that the Agarwals of Alps Industries Ltd who is a neighbour in Ghaziabad have participated in AIL’s private placements. Alps is said to be the major customer of AIL. Now, what’s the track record of Alps? This 1995-vintage IPO, which was offered at a price Rs 50, is currently going abegging at less than Rs 2! Incidentally, the merchant banker’s representative, who vouches for AIL’s IPO today, was also the advisor to Alps IPO in 1995!
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OFFER AT A GLANCE |
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Issuer Name |
Anisha Impex Ltd |
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Offer Amount |
Rs 6.5 cr |
|
Offer Quantity |
65 lakh shares of Rs 10 each |
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Offer on Total Equity |
39.6% |
|
Post-issue Promo stake |
36.7% |
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Post-IPO Capital |
Rs 16.43 cr |
|
Offer Price |
Rs 10 |
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Application Quantity |
10,000 & Multiples of 10,000 |
|
Offer Opens |
March 3, 2014 |
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Offer Closes |
March 5, 2014 |
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Listing |
SME Platform of BSE |
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Rating |
Nil |
|
Lead Manager |
Inventure Merchant Banker |
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Market Maker |
Share India Securities |
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Registrar |
Bigshare Services |