Bajaj Corp IPO opens; should you subscribe?

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Bajaj Corp IPO opens; should you subscribe?

The 45 lakh shares initial public offer (IPO) of Bajaj Corp, a part of Bajaj Group, has opened for subscription.

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The 45 lakh shares initial public offer (IPO) of Bajaj Corp, a part of Bajaj Group, has opened for subscription. The company intends to raise Rs 283.50 crore at lower end of price band and Rs 297 crore at higher price band.

Bajaj Corp is one of India's leading producers of hair oils. Its key product is Bajaj Almond Drops. In addition, it markets hair oil under the brand names Brahmi Amla, Amla Shikakai and Jasmine Hair Oil. It also produces oral care products under the brand name Bajaj Black Tooth Powder. The company manufactures products at two company-operated facilities in Parwanoo and Dehradun.

Experts have recommended the issue for long- term while brokerage views were mixed. Investment Advisor, SP Tulsian felt the company may give safe returns to investors in the longer-term. Even Manish Bhatt of Prabhudas Lilladher advised the same.

Compared to peers, the company enjoys healthy net profit margin due to limited scale and depth of operations. Going forward, as new product launches are undertaken, margins are likely to come under pressure. At the lower and upper end of the price band, the company is issuing shares at PE multiples of 18.8 and 19.7 times, respectively. This works out to valuation of Rs 1,850 to Rs 1,950 crore, mainly for 1 hair oil brand - Bajaj Almond Drops. The issue price factors in the growth of future products to be launched by the company. Listed peers, both Indian and MNCs, much larger in size, are presently ruling at PE multiples of 25 and above on the bourses," Tulsian said.

He also said, "On a relative basis, the valuation seems to be fair. However, taking a fundamental call leads to a neutral view on the issue. The company being an FMCG player, considered a defensive sector, may give safe returns to investors in the longer term, as it continues to grow through new product launches and strategic acquisitions to taps its distribution reach further."