SPA Securities has come out with a report on Gokul Refoils and Solvent's IPO. It has recommended investors to ignore the issue.
The issue will open for subscription on May 8, 2008 with its initial public offering (IPO) of 7,158,392 Equity Shares of face value Rs 10 each. The issue will close on May 13, 2008. The price band has been fixed at Rs 175 to Rs 195 per equity share.
SPA's report on Gokul Refoils and Solvent's IPO:
GRSL is engaged in the business of seed processing and solvent extraction, refining edible oils and vanaspati manufacturing. GRSL has four manufacturing units located within the state of Gujarat. It exports its goods to USA, European, South Asia and other countries apart from catering to the domestic market.
ICRA has assigned an IPO grade “3/5” to this issue. This indicates average fundamentals of the company.
Valuation:
The stock is available at P/E of 7x and 8x on its lower and upper price band respectively on its annualized FY08E EPS of Rs 24.43. GRSL has been in the industry for 15 years but has failed to capitalize the domestic market completely. GRSL has forayed into the retail segment, but has limited presence in the segment and faces stiff competition from existing players. The EBITDA and PAT margins of GRSL for 8M FY 2008 have been 6.5% & 3.25% (the average in the past for the same EBITDA and PAT have been 3.28% and 1.8%) respectively. GRSL lacks delegated professional management. The company has made significant investment in non-core business activities. GRSL intends to increase its export business which carries the risk of exchange rate fluctuations. The demand for edible oil in India is significant which can give a boost to GRSL’s revenue. GRSL is into commodity trading business where the prices are highly volatile. GRSL operates in a highly government regulated industry. Hence, we recommend, to ignore the issue.
Promoters are not trustworthy too.
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