Amrapali Capital And Finance Services Introduces An IPO

Till date, many finance & investment companies have filed DRHPs to list their equity shares on the SME platform of the BSE. Amrapali Capital and Finance Services (ACFSL) is another company to have come up with an IPO. It has proposed to issue 24 lakh equity shares at a fixed price issue of Rs 100, which is at a premium of Rs 90 per share of face value. The issue constitutes of market maker portion, which includes 1.30 lakh equity shares. The lead manager for the issue is Corporate Strategic Allianze.

ACFSL commenced its operations in 1995-96. It has business interests in the trading of shares, currency, stocks, equity brokerage, distribution of financial products, forex, depository and clearing services etc. The company is registered with the NSE, BSE, MCX-SX and United Stock Exchange of India Limited (USE) for its trading and clearing activities. ACFSL is also registered with the NSDL and NCDEX to undertake the functions of depository participants. In addition, it also provides research services, operates as a market maker and provides mutual fund advisory services.

The company posted a 46% growth in the income earned from its trading activities. Its total operating income grew to Rs 11.28 crore in FY12 which was Rs 8.56 crore in FY11. Its 9MFY13 revenue stood at Rs 13.23 crore. Moreover, due to the increase in other expenses, the operating expenses of Amrapali increased by 49% to Rs 9 crore in FY12. However, the increase in operating cost has led to a decline in the operating profit by 10% skewed to Rs 2.28 crore. The company’s bottomline stood at Rs 13 lakh during FY12 against Rs 5 lakh in FY11. In spite of a decline in its finance expenses and tax expenses during this period, the margins were affected drastically.

The company intends to utilise the issue proceeds for its long-term working capital requirements. This amount will be used to fulfill the margin requirement with the stock exchanges. Some part of the net proceeds will be employed as general corporate expenses and meet the issue expenses.

The Mumbai-based broking company has quoted Rs 100 per share for this issue. With this price, ACFSL's share price will trade at a PE of 738.63x of its FY12 EPS of Rs 0.14. Whereas, if we consider the companies in the listed space; DB International Stock Broker and BCB Finance are trading at a PE of 142.92x and 47.14x respectively. While, the other companies which have filed a DRHP to list its shares on the bourses - GCM Securities and Alacrity Securities - have their PE at 116.53x and 303.47x respectively. ACFSL thus seems to have quoted a high price, considering its valuations. We therefore suggest that investors should not subscribe to this issue.