Fatpipe Networks IPO opens; should you subscribe?

Investment advisor, SP Tulsian and brokerage firm Hem Securities advised investors to avoid the issue as its valuations looked stretched.

Tulsian said, "As on 31st December 2009, receivables stood at Rs 13.6 crore, implying a debtors turnover ratio of just 4.5 times. Its networth as on that day was Rs 35.9 crore, and with 1.3 crore outstanding shares of Rs 10 each, the resulting book value per share is Rs 27.6. The only silver lining in its financials is its debt free status. The company also has some operation and regulatory hurdles before it. On the intellectual property and potential competition front, it has seven product patents, which are only in the US. It does not have any patents or trademarks in India or any other geography, where it is looking to expand its business, to 40% of sales, over the next three years."
 
"This looks to be a structured IPO, just to raise funds. The fundamentals do not justify valuation of Rs 155 crore. It is a clear avoid," he said.