Fairval

Notes on Indian equities, sectors and economy

Archive for the ‘IPO’ Category

Adlabs Entertainment – The Most Expensive IPO EVER?

Posted by fairval on March 16, 2015

Manmohan Shetty owned Adlab Entertainment’s IPO is amazingly expensive, even by the standards of the Media and Entertainment industry, where good stocks do tend to quote at a premium.

Consider this:

  • The company has just 18 month of operating history
  • Still making cash losses. In Apr-Sep’14, it reported a cash loss of Rs 50 crore! This is about 70pc of revenue
  • No debt rating reported after Jan’14, which is suprising given that it has over Rs 1200 crore of debt.
  • Probably needs to double revenue just to break even. Its ticket price is already more than 2x of other game parks. May find it hard to raise ticket prices too much. High ticket prices could limit foot falls too.
  • Hard to see double digit ROCE.

It is asking for EV/Sales of over 20x. The issue’s last date is tomorrow. Lets see if it closes. The retail portion seems to be subscribed

Posted in IPO, Valuation | Tagged: , | Leave a Comment »

VCs need to understand secondary markets better

Posted by fairval on September 1, 2014

Now that we are running a couple of Series A transactions in very exciting, but small, unlisted companies, the one question we get asked by interested VC investors is this: But how will we get an exit? They tell us – in this company, IPO is unlikely.

This despite projected revenues of around Rs 400 crore and net profit of over Rs 70 crore in each case. So even if they miss the projections by 20-30%, they could still make a topline of Rs 300 crore and net income of Rs 40-50 crore at exit time. Can an exit via normal IPO happen in a such a company? Most certainly, it can. It seems 6 years of bear market has made VC investors forget how an IPO market behaves.

We give the following examples to the investors in support of our above argument.

1.Talwalkars: IPO occurred in Apr’10.
IPO Size: Rs 77 cr
Oversubscription: 28x
Revenue: Rs 65 cr
EBITDA: Rs 18 cr
PAT: Rs 5 cr
Debt: Rs 91cr
IPO Price: 128
IPO Valuation: Rs 309 cr
PE: 71 x
EV/EBITDA: 23x

Banker: India infoline
Current Valuation (1 Sep’14): Rs 521 crore

2.Speciality Restaurants: IPO occurred in May’12
IPO Size: Rs 176 cr
Oversubscription: 2.54x
Revenue: Rs 152 cr
EBITDA: Rs 34 cr
PAT: Rs 18 cr
Debt: Rs 33cr
IPO Price: Rs 150
IPO Valuation: Rs 704 cr
PE: 47 x
EV/EBITDA: 22x

Banker: Kotak
Current Valuation (1 Sep’14): Rs 650 crore

3.Snowman Logistics: IPO just closed (Aug’14)

IPO Size: Rs 197 cr
Oversubscription: 60x
Revenue: Rs 153 cr
EBITDA: Rs 38 cr
PAT: Rs 22 cr
Debt: Rs 130cr
IPO Valuation: Rs 781 cr
PE: 35 x
EV/EBITDA: 24x

Banker: HDFC Bank
Current Valuation (1 Sep’14): Not listed yet

As can be seen, all 3 were small companies at the time of IPOs. Because of strong growth prospects, leadership position in their niches, they were able to command a good valuation, whether you look at EV/EBITDA or PE, at the time of IPO.
Speciality Restaurants is quoting below its IPO price, indicating that its banker priced it too high. Despite that, it garnered 2.5x oversubscription at IPO.

Posted in IPO, Markets, PE/VC | Tagged: , , , | 2 Comments »

IPOs in 2013

Posted by fairval on February 13, 2014

There were 1046 IPOs in major exchanges around the world in 2013, it seems. US accounted for 22% of these, London half of that. While BSE it seems did have 33 IPOs, most of these must have the SME IPOs, since NSE has only 7 to show. Ranks 4 to 8 are all Asia Pacific countries. So Mumbai’s dream of becoming an Asian financial hub are far from reality.

There were 96 new foreign IPOs on these exchanges. India is yet to see one.

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Posted in BFSI, Data, IPO, Markets | Tagged: , , , | Leave a Comment »

Just Dial is now the 4th most valuable media stock in India

Posted by fairval on June 25, 2013

Just Dial seems to have done well since listing. Having gained over 15% from the IPO price, it is now ranked 4 amongst Indian media stocks. This makes it more valuable than all listed print stocks, radio stocks, and behind only 3 stocks – 2 TV broadcasters cum distributors, and one pure TV distributor (DTH co).

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It also seems to have decisively left behind Info Edge, the other classified advertising company, which is still struggling to grow beyond recruitments.

Just Dial is tho now perhaps the most expensive stock on Indian stock markets, quoting at over 60x trailing. It needs to grow earnings at >50% CAGR for shareholders to make returns from these price levels.

Posted in IPO, Media and entertainment, Valuation | Tagged: , , , | Leave a Comment »

Facebook versus A2Z Maintenance Services

Posted by fairval on May 30, 2012

Facebook’s IPO has drawn a lot of flak in the US, when it fell more than 15% or so within days of listing. A few class action suits has already been filed by the time the share price was around $32. The share price has fallen further, as of yesterday, the stock was down to $28, or over 30%.

Contrast this with the complete lack of action from either SEBI, any domestic fund or investors in an Indian IPO. No lack of examples where the share price drops dramatically after an IPO. And not just the share price, even the company performance.

A classic example is A2Z Maintenance & Eng Serices, a stock were Rakesh Jhujjhunwala had about 20% and was on the board of the company as on the IPO date. The IPO was in Dec’10 at a price of range of Rs 400-410. The company listed on 23 Dec’10 at a price of Rs 398, i.e, below the IPO price. It has never once touched the IPO price since. Rs 398 remains the all-time-high price. On 10 May 2012, earlier in the month, it made its all-time-low of Rs 83.7.

The IPO had six bankers, all the big names  – Enam, BofA Merrill, ICICI Sec, SBI Caps, IDFC, Yes Bank.

And it is  not just about the share price. What the SEBI, or ICAI, should probe, is the quality of the company’s financials. It is known fact that most Indian companies fudge their financials in the IPO year. SEBI needs curb this practice.

A2Z could have done the same. Since post listing, its profits and margins seem to have dropped precipitously. Standalone PAT has dropped from Rs 94 crore in FY10 to Rs 19 crore in FY12.So did it show artificial profits pre-IPO?

Rakesh Jhujhunwala, though, has remained invested. He bought another 3-4% from the open market earlier in the month. Must be still on the board as well.

Posted in Corporate Governance, IPO, Markets | 1 Comment »

NBCC IPO appears dirt cheap

Posted by fairval on March 23, 2012

Unless we are getting some math wrong, the NBCC IPO appears dirt cheap. At the upper end of the IPO price band, the valuation seems to be just about 8.5x 1HFY12 annualised eps. Similarly, EV/EBITDA is just 5.3x at the upper end.

The market cap at the upper end of the price band appears to be Rs 1272 crore. And NBCC is a zero debt company with Rs 1368 crore of cash on its books on Sep’11, as per IPO document. So what is this – the government is giving away the company for free?

On day 2, the IPO is already oversubscribed about 2x at the upper end of the price band. Wont be surprised this issue gets subscribed 50x!

Posted in IPO | Tagged: | 1 Comment »