CNBC-TV18’s Executive Editor, Udayan Mukherjee – Sita Shree Food is certainly could be one of those crazy ones. But it’s the sector, which is centrally in the markets mind space at this point in time. What do they make or what do they sell is wheat - prices are going through the roof, rice prices going through the roof. What are they setting up is a flourmill again. Everybody knows what’s going on with some of these agricultural commodity prices in the country, so whether or not it is a direct play, people will equate the two; high wheat prices equal to more profits for Sita Shree Foods, they go out and buy them.
 
So it’s the right sector from a flavour point of view at this point with such a big inflation scare going around in the market and you could see a lot of retail HNI punter interest is building up here. It could list at around Rs 35-36 on that issue price of Rs 30. They are doing some interesting expansions setting up, which is solvent extraction plant and getting into lecithin as well.

But the two problems are; firstly it’s an extremely low margin business, 3% operating margin. Generally one does not tend to get terribly excited by 3% margin businesses. The other point is that expectations of earnings per share (EPS) for the next year is 60-70 paise per share. The stock is coming at Rs 30, probably will list at Rs 36.
 
So you are already talking about a 50 kind of PE multiple on listing. I think the peer set is available at a big discount to that one, if indeed they deliver only about 70 paise earnings in the next financial year. So valuations are a bit of a concern though it’s very small and margins are a bigger concern. You need to keep that at the back of your mind while playing the stock sentimentally because all these grain prices are going up quite a bit. But you could see fun and games ; it’s too small and I am sure some operators will log on to this one this morning.