Shri Krishna Prasadam Plans To Raise Rs 216 Lakh Through IPO

Here is an interesting company, Shri Krishna Prasadam (SKP), planning to tap the primary market. It is planning to raise Rs 216 lakh from this offering and list its equity share on BSE SME platform. Sobhagya Capital Options is the lead manager for the issue. The issue opens today and closes on 14th March 2014.

SKP is planning to issue 21.6 lakh equity shares of face value Rs 10 each for cash at a price of Rs 10 per equity share. Out of the total offered equity shares, 4 lakh are reserved for SKP's existing promoters; 1.1 lakh are reserved for the market maker and the remaining 16.5 lakh equity shares are available to the public. Hence the issue and net issue will constitute 44.38% and 33.90% respectively of the post issue paid up equity capital of the company.

SKP started its operations in the year 2009. The company was initially engaged in the business of manufacturing, exporting and supplying of gemstones, stone jewelry, rudraksha beads, shivlings, shri yantras, sphatik ganesh, rudraksha pendant, rudraksha mala etc in India. Over the years, the company expanded its operations in areas such as real estate broking, consultancy services and agricultural products trading.

The company is planning to raise the fund to support its increasing working capital requirements and general corporate requirements. On financial front, SKP showed good increase in the revenue growth during current financial year only. The 700% annualised growth in revenue was probably due to an increase in trading and retail broking activities during current financial year. However, the company's net margins were down considerably to 2.02% during the same period compared to that of 2.45% and 4.15% during FY12 and FY11 respectively. There was 3642% increase in its annualised net profit to Rs 4.11crore during the same period against Rs 0.11 crore during FY13. However, investors should look at the consistent growth in financials of any company rather than a sudden pick like SKP.

The company has recently changed its focus to real estate broking and agricultural produce trading and we expect that the company will take its sweet time to establish itself in the market. On valuation front, the offered stock price is Rs 10, same as its face value. However, it is still 1.18 times its annualised EPS of Rs 8.46 per share for FY14. Considering its present business model, we think that there is not much value in investing in this company. We recommend our readers to avoid this IPO and look for better opportunities in the market.