Prataap Snacks Ltd IPO.......... Should you Invest????
Hello
Friends,
Well it
seems to be the final IPO of the month and this month really has been one hell
of an IPO season. The IPO we are gonna talk about today is Prataap Snacks Ltd. So
let’s look into this pack, shall we?
Particulars
|
Details
|
Issue Open Date
|
22nd Sep 2017
|
Issue Closing Date
|
26th Sep 2017
|
Issue Price Band
|
Rs 930 to Rs 938
|
Issue Size
|
Rs 481.94 Crs
|
Shares per Lot
|
15 Shares
|
About the
company!!!
India is a
country where we all love namkeens. Even though the market is flooded with
competition, we still find new brands popping in and out at times. The company is
in the business of manufacturing and selling edibles fmcg products such as
potato, corn and other chips. Although this market is dominated by lays, peppy,
cornitos and many other, like I said earlier there is always room for some
profit.
Now that
you know the company. Should you invest in Prataap Snacks Ltd?
Promoters!!!
The Promoters of the Company are Arvind Mehta, Amit Kumat,
Apoorva Kumat, Rajesh Mehta, Naveen Mehta, Arun Mehta, Kanta Mehta, Rita Mehta,
Premlata Kumat, Swati Bapna, Rakhi Kumat, Sandhya Kumat and SCI. As on the date
of this Red Herring Prospectus, the Promoters hold 16,339,536 Equity Shares in
the aggregate, which is equivalent to 76.63% of the pre-Issue issued,
subscribed and paid-up Equity Share capital of our Company.
Come let’s
dive into this company to look at the fruits it might hold.
Utilization
of Funds!!!
The issue
is partly aN OFS and partly a fresh issue.
1. OFS of Rs 281.94 Crs which will go
to the promoters and will not be received by the company.
2. Fresh issue of Rs 200 Crs which will
be utilized for the following:
a. Repayment/pre-payment, in full or
part, of certain borrowings availed by our Company = Rs 12.98 Crs
b. Funding capital expenditure requirements in
relation to expansion (including through setting up of a new production line
and construction of a building) and modernisation at certain of our existing manufacturing
facilities. = Rs 66.98 Crs
c. Investment in our Subsidiary, Pure N Sure,
towards enabling the repayment/pre-payment of certain borrowings availed of by
our Subsidiary = Rs 29.37 Crs
d. Marketing and brand-building activities = Rs
105.20
e. General corporate purposes. = balance.
The company
has some serious plans for the funds raised. However it seems that most of the
funds are going into marketing and brand building. Which means that, these
funds will be wiped off from the company as expenses soon. It really shows that
the company is facing stiff competition.
Subsidiary!!!
The company
has one subsidiary: Pure N Sure
Food Bites Private Limited.
So into the
Financials now!!!
1. The company’s consolidated networth has
increased from Rs 146.89 Crs as on 31.03.2013 to Rs 238.34 Crs as on
31.03.2017. Not bad for a company operating in this industry.
2. The company’s consolidated long term
liabilities are at Rs 49.13 crs as on 31.03.2017, which is good as compared to
the company’s networth.
3. It is important to note that the
company is operating more on its vendor’s money. We can see that as on
31.03.2017 the company’s creditors stand at Rs 77.28 Crs, which is much higher
than its long term liabilities. This amount can be seen locked up in its huge
inventory pile of Rs 78.87 Crs as on 31.03.2017. Not a good sign. Clearly the
company is struggling with sales and working capital management.
4. Company has a good amount of fixed
assets and more capital assets are under WIP. Clearly the company has worked on
its assets and is continuing to work on its assets.
5. Now looking into the consolidated Profit
and Loss A/c, the revenue has increased from Rs 344.48 Crs in FY 2012-13 to Rs
905.46 Crs in FY 2016-17, which is good.
6. Looking into the consolidated profit
of the company, the profit has been very inconsistent and not been on a rising
front. Whatever may be the reason for the inconsistent profitability it is very
much imperative to note that the company is not able to control its position in
the market.
7. Consolidated Profit for FY 2012-13
was Rs 14.87 Crs whereas profit for FY 2016-17 was Rs 9.89 Crs.
Valuations!!!
As the company
has very inconsistent profitability we shall consider the weighted average
consolidated EPS of past 3 years, which comes to Rs 7.63. At the price of Rs
938, the PE shall be 122.94. I have seen overvalued IPOs but this is like
asking for the heavens. Even on the basis of standalone weighted average EPS of
Rs 8.25 the PE shall be 113.7. Very high valuations indeed.
So the
verdict on this case!!!
Prataap
Snacks Ltd is a company operating in a very competitive space and it’s not in
the elite clubs on its business. The company is struggling with its profits and
most of all the valuations don’t support the price by even a mile. This issue
is a clear 'avoid'.
Thank you
very much for joining us.
-RicherInvestor
Written by
Roger Vins Herman (CA, Mcom)
Disclosures:
The author or any person at RicherInvestor doesn't have any financial interest in the Company.
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