SVPCL LTD - IPO prospects

SVPCL- Avoid !!!

Issue Date :Oct 22- Oct 26
Issue Price :40 Rs - 45 Rs
Min. Order Quantity :125 Shares
Grade :Average
Recommendation :Skip

Company Info


SVPCL, a leading paper products manufacturer in South India, proposed to enter markets with a public issue of Rs 34.50 crore through a 100 per cent book-building process. The issue opens on October 22 and closes on October 26. The price band is fixed at Rs 40-45 per equity share of Rs 10 each.

The company plans to use the net proceeds from the issue to expand its existing manufacturing facilities in Hyderabad, Vijayawada and Visakhapatnam, to set up marketing infrastructure in 10 identified locations in the country, to enhance its long-term working capital requirements and to meet expenses of the issue.

Other than the IPO, the company will raise its finance required by internal accruals. Out of the Rs 34.50-crore public issue, 50 per cent is allotted to Qualified Institutional Buyers, 15 per cent to non-institutional investors and the remaining 35 per cent to retail.

Valuation

SL is offering it’s shares at a price band of Rs.40 - Rs.45 at a P/E multiple of 13 & 15 respectively. The issue looks to be fully priced with not much room left for new investors. Last year, another company (from the same industry) i.e. Blue Bird India Limited, had come out with an issue of the same P/E as that of SL & is currently trading at a P/E of 7 with turnover being more than that of SL.

Currently, the capacity that SL has is under-utilized & SL is still looking for expansion & that too in the same region (viz. south India). There are other companies (peer group) which have better turnover than SL & valuations of which are more attractive than SL. Hence, we give an “Ignore" rating to the issue.

Premium on listing - Rs 2- Rs 5