Finshore Management Services Comes Up With An IPO

The SME platform of BSE provides a good opportunity to the small and medium enterprises to explore their business. The financial service provider company Finshore Management Services (FMSL) has filed a DRHP to the BSE SME.

FMSL is tapping the market with an IPO to raise an amount of Rs 4 crore. The public issue consists of 6.67 lakh equity shares, of which 1.17 lakh equity shares are reserved for market makers. The said issue will be a fixed price issue at a price of Rs 60 per share of a face value of Rs 10 each. The net issue available to public is 5.5 lakh equity shares. Currently, FMSL has 15.25 lakh outstanding equity shares and it will reach 21.92 lakh equity shares after the issue. The total offered issue comprises of 30.42% and the net issue comprises of 25.10% of the post issue paid-up equity shares capital. The lead manager for this IPO is LSI Financial Services.

The company is based in West Bengal and was incorporated in November 2011. Since its incorporation, it operates as a financial service provider. It provides 3 types of services namely corporate finance and advisory, education management consultancy and hotel management consultancy.

Currently, FMSL provides its services to small and medium enterprises and business entities. Its corporate finance and advisory segment offers various services such as debt syndication, merger and acquisition, valuation services and restructuring advisory. Its other segment, education management consultancy, offers services like project planning, affiliation formalities, financial planning, promotion and branding, faculty recruitment. FMSL's hotel management consultancy segment offers services like project planning and implementation, financial planning, administration, promotion and marketing and human resource management. The company is also involved in commodity trading. In addition, the company also proposes to offer other financial services in the near future, which may comprise of private equity advisory, business sales and disposal and structured finance.

As the company was incorporated in late 2011, its first fiscal year 2012 comprises of 3 months of operations. It posted Rs 46.94 lakh topline in FY12. During this period, the income generated from its 3 segments - corporate advisory fees, educational advisory fees and commodity trading - stood at Rs 15.25 lakh, Rs 4.50 lakh and Rs 27 lakh respectively. It showed a bottomline of Rs 20.79 lakh in the same period.

FMSL, for the said issue, has quoted a fixed price of Rs 60 per share, at a PE of 63.25x of FY12 EPS Rs 0.95. However, its peers listed companies namely Microsec Financial Services, LKP Finance and Muthoot Finance are currently trading at a trailing twelve-month PE of 11x, 7.47x and 5.54x respectively of EPS. The quoted issue price by the company is quite expensive.

Meanwhile, the company is an inexperienced player in the market. The factors which majorly affect FMSL are greater resources, longer operating history and good brand recognition of the listed and established players in its operating sector. Moreover, the other recognised education and hotel management consultancy firms will also impact the advisory segment of FMSL. These factors make the company a weak player. Considering all these factors, readers are recommended not to go for this public offering.