27 April 2013

Scotts Garments IPO: Another Bombay Rayon in the making? VS Fernando, Financial Analyst & Columnist

The clout that Bombay Rayon's new owner, Best Seller of Europe, exercises over Scotts Garments makes one feel that the Bangalore-based company may go in the same way of Bombay Rayon!
The IPOThe present IPO is a fresh issue of 105.07 equity shares of face value of Rs 10 made through 100 percent book building process with a price band of Rs 130 to 132 per share aggregating to Rs 137 cr to Rs 139 cr. Keynote Corporate Services and Canara Bank Merchant Banking Division are appointed as book running lead manager (BRLM) and co-book running lead manager (C-BRLM) respectively. Keynote Capitals is acting as a syndicate member. Though the offer document does not specify the amount underwritten, the BRLM would be responsible for bringing in the amount devolved in case the syndicate member does not fulfill his obligation.
Issue ObjectiveThe main object of the IPO is to part finance the company's trouser manufacturing facility at Doddaballapur in Karnataka and knitting & fabric processing unit at Kagal in Kolhapur district of Maharashtra. Both these projects are estimated to cost Rs 320 cr including working capital margin of Rs 11 cr. Canara Bank has sanctioned a term loan of Rs 150 cr for the projects.
OFFER AT A GLANCE
Name
Scotts Garments Ltd
Public Offer
Fresh issue of 105.07 lakh shares
Offer Price
Between Rs 130 and Rs 132
Offer Amount
Between Rs 137 cr and Rs 139 cr
IPO% on Total Equity
26.95%
Post-IPO Free Float
47.8%
Application Quantity
100 & Multiples of 100
Bid/Offer Opens
April 25, 2013
Bid/Offer Closes
April 29, 2013
Listing
NSE and BSE
IPO Grading
CARE
Grade
3 out of  5
Lead Manager
Keynote and Canara Bank
Registrars
Link Intime India


















Scotts Garments IPO: Skip the issue and wait for listing:: ET

Bangalore-based Scotts Garments is a garment manufacturing company whose product range includes trousers (cotton and denim), woven, knits, sweats and jersey. The company has entered the capital with a public issue of over 1 crore shares at a price band in the range of Rs130 and Rs 132 per share at the face value of Rs10.

The company has 15 factories and state of the art textile mills in Karnataka and Tamil Nadu. At the higher end of the price band, the company plans to raise over Rs138 crore. Through the proceeds of the initial public offer, the company plans to set up trouser-manufacturing unit at Doddaballapur in Karnataka and a knitting-and-fabric-processing unit at Kagal in Kolhapur. Financials & Concerns For FY12, the company had net profit of Rs84 crore on net sales of Rs500 crore. In comparison with the company had net profit of Rs34 crore on net sales of Rs495 crore. This growth has been fostered by one-time adjustment of sale of investment of Rs60 crore.

In the last five years, the company's financial performance has been erratic. This makes it difficult to estimate future trend of its financial performance in terms of revenues and earnings growth. The company derives 76% from Europe in FY12. The company also has concentrated exposure to a single client Best Seller. It derives 62% of its revenues from the client. Such concentrated exposure to a single client and dependence on one market can result in strong fluctuations in terms of revenues growth or decline depending the business situation.

Going ahead a lot would depend on the company's ability to diversify across geographies and clients. Bigger the diversification greater the possibility of fluctuations in its revenues.

Valuation On the valuation front, at the higher end of the price, post-issue considering fully diluted equity and annualising the company's net profits based on seven months financial performance, the company's issue is commanding a price to earnings multiple of 14.7.

This is quite expensive than most established players like Mandhana Industries, which also has presence in Europe and is trading at a price to earnings multiple of 10. Investors are advised to wait for the company's shares listing in the secondary markets and skip the issue. Business

Bangalore-based Scotts Garments is a garment manufacturing company whose product range includes trousers (cotton and denim), woven, knits, sweats and jersey. The company has entered the capital with a public issue of over 1 crore shares at a price band in the range of Rs130 and Rs 132 per share at the face value of Rs10. The company has 15 factories and state of the art textile mills in Karnataka and Tamil Nadu. At the higher end of the price band, the company plans to raise over Rs138 crore. Through the proceeds of the initial public offer, the company plans to set up trouser-manufacturing unit at Doddaballapur in Karnataka and a knitting-and-fabric-processing unit at Kagal in Kolhapur.

Financials & Concerns

For FY12, the company had net profit of Rs84 crore on net sales of Rs500 crore. In comparison with the company had net profit of Rs34 crore on net sales of Rs495 crore. This growth has been fostered by one-time adjustment of sale of investment of Rs60 crore. In the last five years, the company's financial performance has been erratic. This makes it difficult to estimate future trend of its financial performance in terms of revenues and earnings growth.

The company derives 76% from Europe in FY12. The company also has concentrated exposure to a single client Best Seller. It derives 62% of its revenues from the client. Such concentrated exposure to a single client and dependence on one market can result in strong fluctuations in terms of revenues growth or decline depending the business situation. Going ahead a lot would depend on the company's ability to diversify across geographies and clients. Bigger the diversification greater the possibility of fluctuations in its revenues.

Valuation

On the valuation front, at the higher end of the price, post-issue considering fully diluted equity and annualising the company's net profits based on seven months financial performance, the company's issue is commanding a price to earnings multiple of 14.7. This is quite expensive than most established players like Mandhana Industries, which also has presence in Europe and is trading at a price to earnings multiple of 10. Investors are advised to wait for the company's shares listing in the secondary markets and skip the issue




FII & DII trading activity on NSE, BSE and MCX-SX 26-04-2013

CategoryBuySellNet
ValueValueValue
FII3337.363112.61
224.75
DII1034.391412.17-377.78

 


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FII DERIVATIVES STATISTICS FOR 26-Apr-2013

FII DERIVATIVES STATISTICS FOR 26-Apr-2013 
 BUYSELLOPEN INTEREST AT THE END OF THE DAY 
 No. of contractsAmt in CroresNo. of contractsAmt in CroresNo. of contractsAmt in Crores 
INDEX FUTURES525761559.07425481268.873302909779.00290.20
INDEX OPTIONS2274626652.782266536636.44138047640553.7316.35
STOCK FUTURES552571584.83728742064.2481955022544.11-479.41
STOCK OPTIONS491321390.88510711437.05386631065.15-46.17
      Tota-219.03


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