Things you need to know about S Chand and Company Ltd IPO before investing.....

Recently IPOs have gained very good charm with IPOs listing at prices even 100% higher than the issue price. This shows how much the Indian stock markets are bullish and how much money is being pumped into the market.

Another IPO lined up is S Chand and Company Limited. I am sure we all would have some way or the other come across books published by this company in school and college days. Yes friends this company is in the education sector. They publish academic books. Education in India has a long way to go and this company is aiming to achieve the best it can in helping India get education. The IPO is set to hit the markets on 26.04.2017 at a price band of Rs 660 to 670.

Should I invest in S. Chand IPO?

Here are some of the important things you should know before you invest:

1. The company is a leading academics book publisher catering into markets like CBSE, ICSE, Competitive exam books, College University and Professional Books,

2. The company operated many brands through its subsidiaries, which are:

3. The proceeds of the issue are to be used for repaying the company’s and its subsidiary’s loans. This means that the money is not for the company alone but also for its subsidiaries.

4. A very important thing to note is that the company is not issuing additional shares but it’s the promoters who are selling their shares.

5. Looking at the financial positions, the company shows a steady rise in revenue from Rs 171.32 Crores in FY 2011-12 to Rs 282.25 Crores in FY 2015-16. However profits are not consistent. Each year from FY 2011-12 to FY 2015-16 has ups and downs. Seems like a bumpy ride for the company.

6. The company is trying to expand by acquiring other companies which is evident from the list of subsidiaries it holds. However this is coming in at the cost of debt. Now looking at the debt equity ratio, debt is hardly 6% of equity as on 31.03.2016. But looking at the finance cost of the company it is evident that both short term and long term borrowings are eating up the margins of the company.

7. If we divide EBIT (Earnings Before Interest and Tax) by Interest cost we see that the earnings can service only 2.86 times the interest. Which is very much low. Interests are eating into the company’s profits.

8. Another important aspect is Selling and Distribution expenses. For the financial year 2015-16 the company has spent Rs 19.93 Crores on Selling and Distribution expenses. This is around 7% of turnover. The selling and distribution overheads are quite high.

9. The company has reported a loss in its Quarter 1 of FY 2016-17. This is hugely due to lower turnover.

Looking at the above points we would say that fundamentally S Chand and Company Ltd at this Price Tag is an avoid call.

Thanks for joining us

-RicherInvestor


Written by Roger Vins (CA, MCom)

Disclosure:
No on from RicherInvestor or the author has any financial interest in the Company.
The author is not a research analyst.