Avon Weighing Systems is entering the capital market on 9th June 08 with a public issue of 1.37 crore equity shares of Rs.10 each at par. Of this, promoters are subscribing to 39.97 lakh shares while 98.36 lakh shares are being offered to the public.
For a change, an existing profit making company, having book value per share of Rs.20.50 as at 31-03-08 is offering shares at par. And that is thanks to present state of the stock market!
The company is authorized dealer and one of the distributors of A&D and Tanita, both of Japan, for marketing its weighing scales in India, mainly to gem and jewellery, pharma, chemicals, R&D Laboratories and Defence Sector, where precision weighing is critical. Due to this, the entire income of the company, comprises of trading turnover, was at Rs.50.50 crores for FY 08. PBT for the year was at Rs.2.75 crores while PAT was at Rs.1.85 crores. However, due to high debtors of Rs.41.50 crores as at 31-03-08, the company has to borrow about Rs17 crores as loan. Finance charges for the year was at about Rs.2.50 crores.
The company having gained expertise of this trade and having good marketing network, has decided to set up its own manufacturing unit at Baddi in Himachal Pradesh with an outlay of Rs.17.30 crores. This is being partly financed by term loan of Rs.2.60 crores and rest by equity. Post issue, equity of the company would be placed at Rs.16.58 crores.
Though equity of the company would be very high and in view of project likely to start by March 09, the results for FY 09 would be purely from existing trading operations. Despite this, considering book value of over Rs.20, the "par" tag and experience of the promoters, share at par holds potential, though it will be of small cap company, as its market capitalization would remain below Rs.50 crores. One can apply for this IPO.