KFL exposes how utterly incompetent are our mkt regulators!

Quality of SME IPOs entertained by the country's oldest stock exchange, as compared to its rival NSE, leaves much to be desired. Is BSE-SME Platform becoming a 'gambling den' for the 'club class' fly-by-night operators? Kavita Fabrics exposes how utterly incompetent are our market regulators! 

The Offer
The 2005-registered Surat-based Kavita Fabrics (KFL) is making a fresh public issue of 12.75 lakh shares of Rs 10 each at a fixed price of Rs 40 a piece aggregating to Rs 5.10 cr. Of the issue, 2.07 lakh shares (Rs. 54 lakh) are reserved for subscription by 'Market Makers' to the issue.

Also Read:   SME: Kavita Fabrics' Rs 5.1cr-IPO opens for subscription

The lead-manager to the IPO, Intensive Fiscal Services, has underwritten to the extent of 83.76% (Rs 4.27 cr). An associate of the lead-manager, Intensive Softshare, and K.M. Jain Stock Brokers are acting as 'market makers' underwriting 15.29% (Rs 78 lakh) and 0.94% (Rs 4.80 lakh) respectively. Subscribers must apply for a minimum of 3000 shares (Rs 1.2 lakh) and multiples thereof. The shares are proposed to be listed on the SME-Platform of Bombay Stock Exchange (BSE).

The Object
Of the Rs 5.10 cr issue proceeds, Rs 3.5 cr is earmarked for long term working capital requirement, Rs 1.2 cr is allocated for 'general corporate expenses' and Rs 40 lakh is meant for issue expenses.

Manager's Track
KFL's IPO is lead-managed by Mumbai-based Intensive Fiscal Services who has managed just two public issues in last three years. While the last IPO managed by them, Prakash Constrowell, has yielded decent returns to investors, the earlier one viz. Inventure Growth has a dismal record. The scrip, issued at Rs 117 in July 2011, almost doubled to Rs 232 within two weeks of listing in August 2011. This was followed by a bumper 3:1 bonus issue! Post-bonus, once the lock-in period lapsed, the price started moving southwards. Today, it is available at below par that is more than 67% below the adjusted IPO price!