Sudar Garments IPO- Strict No for Investors as well as Flippers

February 21, 2011   ·   0 Comments

www.stockssavvy.comSudar Garments Limited is a leading manufacturer and exporter for readymade garments specialized in elegant Shirts, Trousers and wide range of apparel for Men, Women & Kids.

Sudar Garments has its own manufacturing setup at Khalapur Taluka, Raigad District, Maharashtra with a built-up area of about, 29,626.30 Sq. Mtr. having a combined capacity of producing 1,66,667 pieces of shirts, dress, pants, tops, skirts, and denims per month. The company is presently manufacture under its own brand name “Glory to Glory” and will be launching shortly two more brands namely ‘St. Paul’ and ‘Majesty’

Issue Detail:

  »»  »»  Issue Open: Feb 21, 2011 – Feb 24, 2011
  »»  Issue Type: 100% Book Built Issue IPO
  »»  Issue Size: 9,088,000 Equity Shares of Rs. 10
  »»  Issue Size: Rs. 65.43 – 69.98 Crore
  »»  Face Value: Rs. 10 Per Equity Share
  »»  Issue Price: Rs. 72 – Rs. 77 Per Equity Share
  »»  Market Lot: 81 Shares
  »»  Minimum Order Quantity: 81 Shares
  »»  Listing At: BSE, NSE

Rating by CRISIL: 1/5

This means as per CRISIL, company has ‘Poor Fundamentals‘. CRISIL assigns IPO grading on a scale of 5 to 1, with Grade 5 indicating strong fundamentals and Grade 1 indicating poor fundamentals.

Objective of the Issue:

The objective of the Issue are:

1.  Expansion of the existing apparel manufacturing unit;
2. Meeting Working Capital Requirement;
3. Setting up Retail Outlets and Brand Building;
4. Meeting General Corporate Expenses;
5. Meeting the Issue Expenses and
6. Creating a public trading market for the equity shares of the company

Company Financials:


Particulars For the year/period ended (in Rs. Lacs)
  30-Sep-10 31-Mar-10 31-Mar-09 31-Mar-08 31-Mar-07 31-Mar-06
Total Income 5260.26 5397.29 2089.93 888.96 863.28 630.82
Profit After Tax (PAT) 407.69 411.26 58.81 27.58 10.52 (0.91)


Company Analysis:

In FY10, company clocked net profit of Rs. 4 crore on turnover of Rs. 53 crore and in H1FY11, its turnover jumped to Rs. 49 crore while net profit was Rs. 4 crore. On equity of Rs. 9.46 crore, company has a very high debt burden of over Rs. 36 crore, leading to high debt-equity ratio of 1.6:1.

 Discomfort on the company does not end at its poor fundamentals and lack of strong business operations. It has invested Rs. 3.24 crore in unrelated business of a pharmaceutical company named Aasda Lifecare. This goes beyond logic – a tiny textile manufacturer, hitting public doors to fund its expansion, investing a significant sum in non-related business

Company Reviews:

 At the upper price band of 77, share is being issued at pre-money PE multiple of 9x, based on estimated FY11 EPS of Rs. 8.6, given Rs. 4.3 has been earned on per share basis in first six months of FY11. This is grossly aggressive when other more established and integrated textile companies are quoting at PE multiples of 4-6x. Also, fate of Koutons and Cantabil Retail is recent in the minds of the investors.

Verdict: Company has got Nothing to Boast Of. No Great Management, No High Earnings, Stock is given at very High P/E which is unheard of for the Sector. Stock Price doesn’t eve deserve Half the Price it is asking for. Investors & Flippers must Stay away at all Costs. Flippers should avoid this issue in all Circumstances as one can get caught in the Operator’s Play for these Kind of Small Issue at Upper Price Band.

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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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