Ravi Kumar Distilleries is entering the capital market on
Ravi Kumar Distilleries is a Pondicherry-based small-scale manufacturer of IMFL (Indian Made Foreign Liquor) with annual installed capacity of 14.25 lakh cases and 26,000 cases of excise bonded warehouse. The company has its own brand portfolio comprising 30 brands, besides undertaking tie-up arrangements for other companies. However, only 3 of its brands are registered in its own name.
Besides, presently the company has marketing presence only in a small market like
The company plans to utilize Rs. 11.2 crore from IPO proceeds, towards installation of re-distillation plant and to increase existing capacity at its
In March 2008, the company had purchased land for Rs. 15 crore in
Besides expansion, company plans to utilise Rs. 3 crore for marketing and Rs. 34 crore for working capital. Balance Rs. 25.8 crore (assuming upper price band) will meet issue expenses and general corporate purposes. Funds deployed towards general corporate purposes may be more than 20% of the total issue size. This is in violation of existing listing laws.
For FY10, the company reported sales of Rs. 48 crore, of which 18% was sale of traded goods. Net profit of Rs. 2 crore was earned on equity of Rs. 12.5 crore, resulting in EPS of Rs. 1.60. For Q1FY11, results were flat with sales at Rs. 13 crore, with net profit and EPS of Rs. 59 lakh Rs. 0.47 respectively. As of
The company's networth is just Rs. 15 crore, while it has mounting debt of Rs. 26 crore, which will remain after IPO as well. Post-issue, at upper price band of Rs. 64, the company is seeking an enterprise value of Rs. 179 crore, which do not seem justified by any means. The issue, being made at a pre-money PE of 40x and PBV of 5.2x, is definitely expensive.
Even if its expansion crystallizes as per plan, the company will remain a regional play with limited scale of operations. Besides the issue is expensive with a heavy dilution, lacking fundamentals. Give this a miss, it won't get you 'high'!