VKC’s IPO : Funds To Meet Its Capital Requirements

After the listing of two small and medium enterprises on the NSE Emerge platform, and two more on their way, it is now a forex services provider company VKC Credit & Forex Services (VKC) to have filed a DRHP to list its equity shares on this platform. The issue constitutes of both fresh issue and offer for sale (OFS) and is based on book building method. 

The OFS comprise of 18 lakh equity shares to raise an amount of Rs 1600 lakh through fresh issue. Also, the company has not disclosed the issue price and the portion meant for market makers. Book running lead manager for this issue is Inga Capital. Prior to the issue VKC is also considering a pre-IPO private placement of up to 10 lakh equity shares, which aggregates to Rs 650 lakh.

VKC was incorporated in the year 1995, and is based in Chennai. The company primarily operates as a currency exchange and foreign exchange service provider. It provides various services like sale and encashment of foreign currencies, American Express travellers’ cheques, prepaid forex travel card, import and export of foreign currency, foreign currency DD, remittance and inward remittance. In addition to this, it also provides international SIM cards and calling cards. VKC is a RBI authorised dealer (AD-CII) to undertake the specified services.

The company has continuously posted a decrease in its topline since FY08. The company's revenue from operations decreased by 1.86% to Rs 1,07,816.18 lakh in FY12 compared to Rs 1,09,859.80 lakh in FY11. Its total expenditure in FY12 was Rs 1,07,769.46 lakh compared to Rs 1,09,840.41 lakh in FY11. This decrease of 1.89% in FY12 was mainly on account of a decrease in finance charges from Rs 203.16 lakh in FY11 to Rs 173.39 lakh in FY12 and a decrease in purchase of traded goods in FY12 from Rs 1,07,692.90 lakh in FY11 to Rs 1,05,541.98 lakh in the current year. 

The decrease in the purchase of traded goods was on account of low demand from its customers in retail/corporate segment and due to adverse market conditions. Further, the employee-benefit expenses increased by 10.13 percent in FY12 against that in FY11. Surprisingly, VKC's net profit for FY12 increased by 9.51 percent to Rs 41.57 lakh compared to Rs 37.96 lakh in FY11 due to lower finance charges and lower tax expenses.

Further, the company is likely to utilise the raised fund to fulfill its working capital requirement. As per the DRHP, VKC's expected working capital requirement for FY13 and FY14 is Rs 1881 lakh and Rs 3539.5 lakh respectively. The requirement of up to Rs 1200 lakh will be met through the net issue proceeds, while the remaining will be fulfilled through internal accruals and borrowings from banks.

Moreover, VKC has not disclosed the issue price and offered equity shares for net issue. Keep watching this space for more issue related details.