Sita Shree Food Products is entering the capital market on 11m March 08 with a public issue of Rs.31.50 crores in the band of Rs.27 to Rs.30 per share. At the lower end of Rs.27 per share, issue size would be of about 116.67 lakh shares.
The features of the issue are pathetic and negative on all the fronts, and do not seem attractive from any angle. For Fy07, the total income of the company was at Rs.82 crores with PAT of Rs.93 lakh on an equity of Rs.7 crores, resulting into an EPS of Rs.1.33, which implies a PE multiple of 20 times at the lower end of Rs.27. Post issue equity of close to Rs.23 crores would not be able to shown an respectable earnings, which would enable the company to declare any dividend.
The present business of the company of flour mill is not attractive at all; where a mill on can only make profits it's holding the stock, having bought at the time of harvest. Now the company is setting up a solvent extraction plant, of 500 TPD, with an oil refinery of 100 TPD and a flour mill of 275 TPD. It reminds us today about the olden days of 94-95, when over 20 companies from Indore region used to come out with a public issue for setting up their solvent extraction plant. As of today none of them are surviving.
Probably, the same fate would befall this company Despite the shares being issued at a price of Rs.27 do not merit even a glance. However, as it is the trend today, the promoters may indulge in short term momentum, if the issue does not get any response. Clear advice to stay away!