SVPCL Ltd. is entering the capital market on 22nd October, 07 with a public issue of Rs.34.50 crores by issue of equity shares of Rs.10 each in the band of Rs.40 to Rs.45 per share.
The company is a small player in manufacturing paper products like note-book, work-books and other educational stationery and catering to educational sector. Topline for FY 07 was placed at Rs.71.50 crores with PBT of Rs.7.87 crores and PAT of Rs.5.94 crores resulting in an EPS of Rs.5.13 on equity of Rs.11.57 crores.
The present capacity of three plants located at Hyderabad, Vijayawada and Viszag is 19,500 TPA which is operating at about 65% utilization. Inspite of this, the capacity is being expanded to 34,000 TPA with a capex of Rs.37.10 crores which is largely financed by proposed issue.
Blue Bird a large size paper product manufacturer, went public in December 06 and issued shares at Rs.105 per share, and now the share is ruling at Rs.60. This is inspite of the fact that, the company had topline of Rs.454 crores with EBITDA margin of 12.7% and an EPS of Rs.7.50. This company had EBITDA margin of 16.5% with EPS of Rs.5.13 for FY 07.
Post issue, equity of the company may rise to Rs.19.30 crores, and since, the existing capacity is already underutilized, we are skeptical about how much would get added by new capacity additions, to the topline of the company. Working capital requirement of the industry is also very high, which would be an obstacle in improvement of the turnover. Hence, not much increase in financial performance of the company can be expected in FY 08, hence maybe EPS decretive.
Not much can be expected from this company and share at the upper band of Rs.45, looks fully priced, leaving no scope for capital appreciation.
A mediocre company, fully priced.