Should one Subscribe for Shilpi Cables?

March 22, 2011   ·   0 Comments

Shilpi Cable Technologies Ltd (SCTL) is a closely held public limited company incorporated in July 2006.

www.stockssavvy.comMain products of the company are:

  1. RF Cables of various sizes for the Telecom Sector
  2. Low Voltage Power cables
  3. Cable Accessories

Issue Snapshot:

 Issue period: March 22 – March 25, 2011

Price Band: Rs. 65 – Rs. 69

Issue Size: Rs. 55.87 crs

Issue Size: 0.81 cr – 0.86 cr equity shares

QIB atleast 50% eq sh

Retail not less than 35% eq sh

Non Institutional not less than 15% eq sh

Face Value: Rs 10

Book value: Rs 18.14 (September 30, 2010)

Bid size: 79 equity shares and in multiples thereof 100% Book built Issue

 

Capital Structure:

Pre Issue Equity: Rs 24.20 crs

Post issue Equity: Rs. 32.30 crs *

*=assuming pricing at the higher end

Listing: BSE & NSE

Lead Manager: D & A Financial Services Pvt Ltd.

Registrar to issue: Beetal Financial & Computer Services (P) Ltd

 Current Shareholding Pattern

Shareholding Pattern

Shareholding Pattern Pre-Issue Post-Issue
Promoters 99.94 % 74.89 %
Public & Others 0.06 % 25.11 %
Total 100 % 100%

CARE IPO grading: 1/5 indicating poor fundamentals

 Objects of Issue:

The objects of the Issue are:

• To raise funds for capital expenditure on Cable/ wire Assembly shop

• To raise funds for capital expenditure on Tools for 3G enabling

• To raise funds for capital expenditure on augmenting cable manufacturing capabilities

• To raise funds towards margin for working capital for the proposed new businesses

• To raise funds for investment in the Subsidiary of the Company, M/s Shilpi Cabletronics Limited

• To raise funds for General corporate purposes

• To meet the expenses of the issue.

Company Financials: For FY10, it reported net sales of Rs.169.90 cr and PAT of Rs.9.04 cr giving an EPS of 3.73 for FY09.(Calculated on 24.2 Crore Base Equity)

 The company reported net sales of Rs 108.34 cr for the Six Months period ended September 30, 2010, and PAT of Rs 6.96 cr. Considering the same numbers for the next 2 quarters, Company will log 13.92 Crore of Profit & EPS of 4.3(Calculated on the Expanded 32.3 Crore Base)

Competition with Peers: Sterlite Technologies with sales of Rs. 2,500 crore and 10% PAT margin is commanding market cap of Rs. 1,700 crore, translating to a price to sales multiple of 0.7 and PE of less than 7.  While Shilpi Cable, with turnover of Rs. 200 crore and PAT margin of 6.5%, is seeking market cap

Verdict: Company is demanding a P/E of 16.04 which is totally not acceptable. The other Constraints for the company are losses incurred during the past years, high debt of about 86 Crores, liquidity crunch leading to delays in repayment of term loan installments and high working capital utilisation and relatively high gearing. The grading is further constrained by very short track record of the company in manufacturing of RF cables, volatility in raw material prices and increasing competition from the domestic and international players.

We will urge investors & traders to Stay away with these kind of issues. The issue is very small of only 55 crore. Don’t be surprised if any Operator play this IPO. Just be sure that you are not playing with him by participating even after listing for this IPO.

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Rajesh Singla

Rajesh is the founder & CEO of Stockssavvy, Stocks analyst,financial advisor by choice,software engineer by fate,biker,gamer,cricket lover n enthusiastic person. He believes in doing things not just to get by but to get Ahead...

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