Timbor Home - Avoid

Anand Jain / 30 May 2011

Timbor Home (THL) which intends to issue 3690000 equity shares in the price band of Rs 54-63 is planning to raise Rs 19 – Rs 23 crore on its upper and lower price bands respectively. The company is a manufacturer and retailer of modular kitchens, furniture and doors, and door and window frames. It has a pan-India distribution network and three manufacturing units located in Gujarat. 

IPO Analysis

Timbor Home
 
Timbor Home (THL) which intends to issue 3690000 equity shares in the price band of Rs 54-63 is planning to raise Rs 19 – Rs 23 crore on its upper and lower price bands respectively. The company is a manufacturer and retailer of modular kitchens, furniture and doors, and door and window frames. It has a pan-India distribution network and three manufacturing units located in Gujarat.  

Objects of the Issue

Purpose
Amount (Rs. Cr)
Plant and Machinery for Capacity Expansion
2.60
Establishment of Stores
4.00
Additional Working Capital Requirement
12.18

The company caters to the highly fragmented furniture industry, where unorganized players have around 85 per cent market share. THL is a relatively small player in terms of size and number of stores, and has limited brand recall which exposes it to severe competition. The presence of players like Future group, Godrej, Nilkamal, Style Spa, Millennium Lifestyle and Durian - who enjoy a strong brand recall and positioning – further intensifies competition.

There are many concerns that loom large on the company. The company says that it has a pan India presence but out of the 80 stores they operate only 3 are owned and the rest are operated on a franchisee model which might prove to be a deterrent for the company going forward. The topline of the company as for 9MFY11 stands at Rs 54.83 crore as against Rs 51.04 crore for the full of FY10. The bottomline stands at Rs 3.06 crore for 9MFY11 as against Rs 1.78 crore for the full of FY10. The cash flow from operating activities has been in the red since FY06 till 9MFY11. Moreover, in the financials provided in the RHP the company has not provided for any provision on tax. However if we calculate tax at 30 per cent on Rs 3.07 crore then the net profit comes down from Rs 3.07 crore to Rs 2.14 crore. This needs to be looked out.

The company operates on a very thin operating and net profit margin of 5.60 per cent and 3.91 per cent respectively. The amount of debtors has also shot up to Rs 37.19 crore in 9MFY11 from Rs 18.69 crore in FY10 and as per the management the average debtors turnover days are not less than four months, this may also raise some eyebrows. CRISIL has rated the IPO as 1/5 indicating poor fundamentals. Now coming to the valuation part, after adjusting for tax on the post issue equity capital the company is likely to trade at a P/E of 27 – 32 times on its upper and lower price bands respectively which looks to be on the higher side. We believe that the model in which the company operates is not that lucrative and will have to face pressure going forward owing to competition from larger groups like Future group, Godrej, Style Spa, Millennium Lifestyle and Durian to name a few. At present we suggest our readers to avoid this issue. 
 

Issue Information
Rating:
Issue Opens on
30-May-11
Issue closes on
2-Jun-11
Issue Size (No. of Shares)
36.90 lakh equity shares
Price Band (Rs.)
Rs 54 - 63
Issue Route
Book Building
Promoters
Anant S Maloo, Manan V Patel, Abhijeet D Daga, & Maloo Building Material Pvt Ltd
Post issue Equity
1.48 crore equity shares
Lead Managers
Corporate Strategic Allianz
Listing
BSE, NSE
Retail Portion
12.91 lakh equity shares
QIB Portion
18.45 lakh equity shares
Non Institutional Portion
5.54 lakh equity shares

  
Financial Performance (Rs /Cr)
9MFY11
FY10
Total Income
54.83
51.04
Operating Expenses
51.74
47.58
Operating Profit
3.08
3.46
Depreciation
0.50
0.40
Net Profit
3.06
1.78

  
Share Holding Pattern
Pre Issue
Post Issue
Promoter & Promoter Group
63.25
47.12
Others
36.75
27.88
Public
25
Total
100
100