BCPCL To Raise Rs 1036.80 Lakh From Public Offering

As the domestic economy is showing some early signs of recovery, various corporate houses are planning to tap the capital market and willing to raise funds from the public. Following the trend is Wire and Cable Company, B C Power Controls (BCPCL), which has plans to raise Rs 1036.80 lakh from the public and will be listed on BSE, SME platform. 

BCPCL is coming up with a public offering of 57.60 lakh equity shares with a face value of Rs 10 each at a fixed price of Rs 18 per equity share. Out of the equity shares offered, 2.88 lakh equity shares are reserved for the market maker making the net issue consisting of 54.72 lakh equity shares. The issue and net issue constitutes of 48.98 and 46.53 % respectively of the post issue paid up equity share capital of the company. The lead manager to this issue is Sarthi Capital Advisors. The company has plans to raise the funds for the working capital requirements and general corporate purposes.

BCPCL is one of the largest wire and cable manufacturers across India. The company has 5 years of experience in the industry since 2008. In 2010, the company had backward integration by installing the copper and aluminium wire drawing facility. The company's registered office is in Delhi and the manufacturing facility is located at Bhiwadi, Alwar in Rajasthan.

On financial front, BCPCL, being newly born in 2008, showed a handsome five years CAGR of 170 % in its topline till FY2013. More interestingly, the company was also able to expand its EBITDA margins from 1% in FY10 to 2.11% in Q1FY14. However, we assume that the margins are itself very small for any company at EBITDA level. Further, the company's debt levels showed increasing trend and was at Rs 1422.82 lakh as of 30th June 2013. Also the interest as a percentage of total income showed an increasing trend from 0.10 % in FY2009 to 1.36% in Q1FY2014. The increasing interest cost was eating up the company's net margin which was just 0.31% in FY2013.

On valuation front, BCPCL is quite a pricy bet as the offer price is 65 times its FY2013 EPS of Rs 0.27. However, the stocks of the other listed peers in India such as KEI Industries, Torrent Cables, etc are trading at PE of 7 to 8 times. Further, the minimum application lot size is 8000 equity shares which amount to Rs 1.44 lakh, making it difficult for a retail investor to invest. Considering BCPCL's low profitability and higher valuation, we recommend our reader to avoid this offering.