172@29@17@141!~!172@29@0@53!~!|news|business|ipo|-1211827.html!~!|controller|infinite_scroll_article.php
Moneycontrol
Financial Freedom Offer: Subscribe to Moneycontrol Pro and grab benefits worth ₹15,000/-
you are here: HomeNewsBusinessIPO
Last Updated : Mar 12, 2013 04:37 PM IST | Source: Moneycontrol.com

HPC Bio: Another 'scientific' IPO that lacks 'chemistry'!

Even while there is a drought-like situation on the `main frame‘ section of the primary market, a little known investment banker from Kolkata, Guiness Corporate Advisors, has created a record of sort by bringing out as many as five IPOs in less than three months: VS Fernando.

By VS Fernando

Even while there is a drought-like situation on the `main frame’ section of the primary market, a little known investment banker from Kolkata, Guiness Corporate Advisors, has created a record of sort by bringing out as many as five IPOs in less than three months. Incidentally, all the five issues have gone to the SME Platform of BSE. What’s disturbing is the quality of these IPOs. It is indeed a sad commentary on the market regulators that they have turned a blind eye to these IPOs which are quite likely to join the `vanishing companies’ list sooner than later!

A close look at the `stereo-type’ features of the issues managed by Guiness give enough indications that the issuers and the manager have perfectly cooked up the `fundamentals’ to enable them to raise public money. What commitment do the promoters of these companies have can be gauged from their post-issue stake. None of the issues managed by Guiness has a promoter-stake of even 25%! A scrutiny of the pre-issue build-up of the capital, their pricing and profile of the holders amply demonstrate that our regulators are utterly incompetent to guide and protect the investing public.

 

IPOs MANAGED BY GUINESS CORPORATE

ISSUER

IPO

IPO

EQUITY

PROMO

IPO

 

 DATE

Rs Cr

Rs Cr

STAKE%

PRICE

RCL Retail

27-Sep-12

5.80

12.30

22.56

10

Eco Friendly Food

27-Dec-12

7.52

9.89

20.40

25

Esteem Bio Organic

18-Jan-13

11.25

14.90

20.60

25

Sunstar Realty

18-Feb-13

10.62

19.93

22.25

20

Channel Nine

22-Feb-13

11.67

15.51

20.61

25

HPC Biosciences

01-Mar-13

15.75

15.90

22.01

35

 

 

 

 

 

 

 

 

 

Let us take the case of HPC Biosciences. The company has drawn a capital expenditure plan for less than Rs 15 cr. But, it makes an IPO for Rs 15.75 cr! In other words, the promoters want to have easy funding without accountability though the promoters will have a minority stake of just 22% in the post-issue capital of Rs 15.90 cr. Incidentally, HPC is the third ‘organic farming’ IPO in as many months brought out by the same investment banker.

Interestingly, all the three companies are operating in and around the same location in the state of Uttarakhand. What’s more, though their names sound like ‘biotech’ or ‘organic food’ companies, all the three are actually engaged in ordinary agriculture activities cultivating wheat, paddy, sugarcane, etc., besides wood plantation! None of the proposed projects is appraised or funded by any bank or institution.

None of the companies is in dividend list, nor have they any credible financial record to speak about. Only on the eve of the issue their operations bloomed. Most of them took hefty premium from ‘public’ investors through private placements and virtually wiped out the premium by issuing bonus shares just before floating the IPO. The bonus shares significantly reduced the cost of Promoters’ holding which is already abysmally low. In other words, the public fund is left with promoters’ who have very little financial commitment towards the companies. Can the investing public expect great returns from such promoters?

PROJECT/COST COMPOSITION OF GUINESS-MANAGED IPOs

Company Name

Eco Friendly Food

Esteem Bio Organ

HPC Bio Sciences

IPO Project

Organic Farming

Organic Farming

Organic Farming

Location

Uttarakhand

Uttarakhand

Uttarakhand

Project Cost

Rs 745.50 lakh

Rs 1055 lakh

Rs 1495 lakh

Land Development

Rs 506 lakh

Rs 565 lakh

Rs 790 lakh

Green House/Sheds

Rs 114 lakh

Rs 380 lakh

Rs 327 lakh

Farm Equipments

-

Rs 30 lakh

Rs 38 lakh

Fencing/Suply Chain

Rs 65.50 lakh

-

Rs 250 lakh

Brand Bldg/Others

Rs 60 lakh

Rs 80 lakh

Rs 100 lakh

 

 

 

 

 

 

 

 

 

 

 

 

The Offer
HPC is making a fresh issue of 45 lakh shares of Rs 10 each at a fixed price of Rs 35 a piece aggregating to Rs 15.75 cr. Of the IPO, 2.32 lakh shares are reserved for the `market makers’ to the issue, Narayan Securities. The entire issue has been underwritten by the lead-manger, Guiness Corporate. Subscribers must apply for a minimum of 4000 shares (Rs 1.4 lakh) and multiples thereof.

OFFER AT A GLANCE

Issuer Name

HPC Biosciences Ltd

Offer Amount

Rs 15.75 cr

Offer Quantity

45 lakh shares of Rs 10 each

Offer on Total Equity

28.3%

Post-issue Free Float

77.99%

Post-issue Promo stake

22.01%

Post-IPO Capital

Rs 15.90 cr

Offer Price

Rs 35

Application Quantity

4,000 & Multiples of 4,000

Offer Opens

March 1, 2013

Offer Closes

March 5, 2013

Listing

SME Platform of BSE

Rating

Nil

Lead Manager

Guiness Corporate

Registrar

Cameo Corporate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Valuation
The decade-old HPC is offering the shares at a price of Rs 35 a piece. For its age, the price may look cheap but, its financial record speaks something different. Until March 2011, this company did not have a turnover of even a lakh. For fiscal 2012, it reported an income of Rs 2.90 cr and posted a profit of Rs 3.05 cr! For the 8-months ended up to November 2012, on a turnover of Rs 3.64 cr, it netted a profit of Rs 2.95 cr. A question that arises here is, if Indian agriculture is so profitable, why so many farmers are committing suicide in the country?

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment

First Published on Mar 1, 2013 02:35 pm
Sections