DSIJ Mindshare

Top Ten IPO Wealth Creators

In a scenario wherein most of the initial public offerings (IPOs) have failed to perform on the bourses, there are certain IPOs that have created good amount of wealth for the investors. This indicates that if the pricing of the issue is right it has got every reason to create wealth. If something is left on the table for the investors, there is no dearth of investors in primary markets. Going ahead we have provided a list of the top ten IPOs in the last one year that have provided good returns to the investors.

Company

Offer Price (Rs)

BSE CMP (Rs)

% Change

Rushil Decor

72

206

186.11

Onelife Capital

110

279.1

153.73

Flexituff International

155

247

59.35

Tree House

135

203.3

50.59

Speciality Restaurants

150

210.2

40.13

Olympic Cards

30

39.3

31.00

MT Educare

80

93.95

17.44

TD Power Systems

256

298

16.41

Monarch Health Services

40

40.25

0.63

BCB Finance

25

25.1

0.40

1. Rushil Decor

Rushil Decor tapped the market with an IPO exactly this time last year with an issue size of Rs 40.64 crore with the objective of setting up a plant and create a corpus for working capital requirement, etc. The whole issue was subscribed 2.62 times with retail investors showing an overwhelming response, subscribing 6.57 times. The company did not disappoint the participants as even after a year of the issue it has yielded almost three times’ returns from its issue price of Rs 72 per share to the current market price of around Rs 206 per share. It is a flagship company of the Rushil Group and is a leading Indian manufacturer of decorative high pressure laminates and plain particle boards.

2. Onelife Capital

Onelife Capital, a merchant banking company, tapped the market to raise funds worth around Rs 36.85 crore with the objective of purchasing a corporate office, develop portfolio management services, initiate brand building activity and for its general corporate expenses. The whole issue was subscribed 1.53 times with retail investors subscribing 2.5 times. We had given an ‘avoid’ rating when it had tapped the market on the back of weak management (with a history of litigations), poor and loss-making financials over the past four years and poor sentiments in the broking business. Further, it is one of the seven companies that the SEBI had investigated for alleged irregularities regarding the IPO. Despite all these negatives, the scrip is trading higher by 154 per cent of its offer price at Rs 279.

3. Flexituff International

Flexituff International is into the manufacturing of FIBC, geo-textile fabric, ground covers, reverse-printed BOPP woven bags, special PP bags and Leno bags. The company’s market is well-spread with 75 per cent of its revenues coming from the U.S. and European markets. This has the potential to severely hamper the company’s growth over a downfall in demand due to the prevailing economic condition. The company plans to diversify into the highly fragmented and unorganised drip irrigation industry but has failed to provide substantial plans and strategies for penetration. In FY11 FIL’s topline and bottomline grew by 77 per cent and 573 per cent (YoY) to Rs 616.94 crore and Rs 30.97 crore respectively on account of the newly installed capacities that resulted in an increase in sales volumes, higher sales realisations and better profitability. The company got listed at the price of Rs 155 and is now trading higher by 59 per cent at Rs 247.

4. Tree House

Tree House is one of the educational service providing companies based out of Mumbai. The company is primarily into pre-schools which cater to the age group of 1.5 - 6 years. The company tapped the market to raise a total of Rs 113 crore and got listed on August 26, 2011 at Rs 132. As of today the market price is Rs 203, indicating a rise of 51 per cent. The main objectives of the issue were to increase the number of pre-school centres in Rajasthan, repayment of loan and to purchase office premises. As on March 31, 2012 the company had 305 centres across India. The company has also started providing K12 services from December 31, 2010 and is currently providing services in 12 schools in four cities.

5. Speciality Restaurants

Speciality Restaurants (SRL) by virtue is one of India’s leading fine-dining restaurant operators. The company currently operates 69 restaurants of which 49 restaurants are owned and operated by the company and 20 are under a franchise-owned company operated (FOCO) model. SPL also has 13 confectionaries in Mumbai. It raised a total of Rs 176 crore through a public issue of 1.17 crore shares at an offer price of Rs 150 per share. The object of the issue was to mainly utilise funds towards the development of new restaurants, a new food plaza and repaying part of its term loan facilities. The issue got oversubscribed 2.54 times (around 4.68 times in QIB, 2.19 in non-institutional and 0.55 times in retail). It got a decent listing and at its current levels provides a return of 40 per cent.

6. Olympic Cards Limited

Olympic Cards Limited, a Tamil Nadu-based fully integrated manufacturer and retailer of wedding invitation cards, greeting cards and other stationery like envelopes, letterheads, calendars, notebooks, etc, got its shares listed on March 28 at an issue price of Rs 30. Its performance has gradually increased and the stock price has shifted upwards by 31 per cent to Rs 39.3 over time. With the raised capital, the company plans to open a manufacturing unit and four more retail outlets. The financial performance of the company over FY07 and FY11 displayed strength with the revenue growing at a CAGR of 23 per cent and earnings growing at 59 per cent from Rs 34 lakhs to Rs 2.19 crore.

7. MT Educare

MT Educare, better known as Mahesh Tutorials, is an education company offering various coaching services to students based in Maharashtra, Karnataka, Gujarat and Tamil Nadu. The company got listed on April 12, 2012 and opened at Rs 86.50, higher than its upper price band of Rs 80. At the time of writing the new issue analysis, we had recommended subscribing to the issue with a view to earn benefit from the listing day gains. As expected, the scrip opened on the BSE at Rs 86.50 and closed at Rs 94.85 per share, a premium of 18.56 per cent over its issue price. Meanwhile, our advice to investors is to book profit at the current levels as there are several concerns with regards to increasing competition, higher usage of technology and no visible future expansion plans in terms of classrooms, etc.

8. TD Power Systems

Bangalore-based TD Power Systems came with an IPO in August 2011. The issue size was Rs 227 crore and received full subscription. The objectives of the issue were to expand its capacity, meet the working capital requirement, debt repayment and construction of a project office. The company is mainly in the business of manufacture and sales of AC generators. Besides, it also has an EPC segment and a business arm of supplying balance of plant equipments. It also has branch offices in Japan and Hong Kong mainly to sell its equipments. This IPO looked expensive at the time when it came into the market. The sector in which it works is dominated by big players like L&T and BHEL. Also, there is intense competition in the sector from the low-cost Chinese manufacturers. For the year FY12 the company reported 26 per cent rise in topline to Rs 651 crore and 20 per cent jump in the net profit to Rs 49 crore. It has also lowered its debt to almost nil in the last fiscal. Its shares after listing are up by 16 per cent.

9. Monarch Health Services

Monarch Health Services rolled out its IPO in May to raise Rs 6 crore at a fixed price issue of Rs 40. The company is in the business of skin treatments, hair transplant, cosmetic surgery, obesity surgery and laser treatments. It proposed to open 23 clinics of which seven will be in Tier I cities, eight will be in Tier II cities and a further eight will be in Tier III cities this year itself. Though the expansion plan looked aggressive and promising, there were a lot of questions raised regarding the credibility, experience, academic and professional background of its promoters. Also, the company declared an IPO that was larger than the size of its balance-sheet. Its financial performance too was not worthy of praise. The scrip has remained more or less flat since inception and has moved up by 0.63 per cent to Rs 40.25.

10. BCB Finance

In February 2012 BCB Finance, a very small financial entity, tapped the market to raise funds of around Rs 9 crore to augment its capital base and fund requirements so as to increase its operational activities. One should note that this will be the first company to be listed on the BSE’s SME platform. The issue received a muted response from the investors as it was subscribed only 1.09 times. We had given an ‘avoid’ rating to the issue on the back of weak management creditability, muted business growth outlook and high valuation. Despite the above, the scrip is currently trading marginally higher by around 0.4 per cent of its offer price at Rs 25.1.

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