Tulsi Extrusions is entering the capital market on 1st February, 2008, with a public issue of 57 lakh equity shares of Rs.10 each, in the band of Rs.80 to Rs.85 per share.
The company is presently manufacturing 10,483 MT of PVC Pipes which is a low margin business, wherein raw-material costs constitutes over two-third. Also, this sector has lot of competition from the unorganized sector. For FY 07, topline of the company was at Rs.60 crores, of which Rs.23 crores, came in from trading turnover. PAT for the year, was at Rs.4.16 crores, which resulted into an EPS of Rs.7.35.
Prior to these, bottomline was below Rs.10 lakhs, till FY 05, which rose to Rs.1.23 crores in FY 06, on a topline of Rs.17 crores. Obviously, trading turnover was missing in all these years. Strangely, inspite of such poor performance, the management of the company went ahead with issue of two bonus issues in year 2006. On 31-03-06, bonus of 16.66% was issued, while on 23-12-06, bonus of 50% was issued. Strangely, same has been written as 600% and 200%, respectively on page 15 of RHP in capital history of the company. Due to this, equity, rose to Rs.5.68 crores and reserves came down to Rs.5.98 crores, giving book value of Rs.20.50.
To cover up this, 8 months ending 30-11-07, shows a topline of Rs.42 crores, with PAT of Rs.4.72 crores. How come this sudden jump in profitability ?
Kisan Mouldings, a listed company, is engaged into manufacturing PVC Pipes and fittings and furniture. This company, for December 07 quarter, had reported a topline of Rs.36 crores and PAT of Rs.1.88 crores, on equity of Rs.7.04 crores, giving an EPS of Rs.2.67. FY 08 EPS is likely to above Rs.9. Promoters stake of 72% is also quite respectable. Inspite of this, the share is now ruling at Rs.45 per share, ruling at a PE multiple of close to 5.
The sector enjoys very low discounting, in single digit, and this issue therefore, is very richly priced. Better plays are available in the secondary market and it would be advisable to buy existing stocks.
Better to give a pass to the issue.