Ahead of its IPO which opens today, SH Kelkar and Company Limited raised INR1.52 billion from anchor investors. In a statement filed with the BSE, the fragrance and flavour company said it placed 8,469,547 shares at INR180 each with domestic mutual funds and foreign institutional investors.
The Mumbai-based company aims to raise INR5.08 billion through the IPO which will facilitate a partial exit to private equity investor Blackstone. With 44.24 million shares or 33.3% equity stake, Blackstone is the biggest investor in SH Kelkar and aims to offload 13.2 million shares.
Apart from offering an exit to Blackstone, the IPO will raise critical funds for SH Kelkar which had a debt of INR2.01 billion on its books as on June 2015. With INR1.26 billion going directly towards repayment or prepayment of loans, SH Kelkar’s balance sheet stands to gain immensely from the IPO.
Analysts have sounded positive recommendations for the IPO citing strong business fundamentals and superior track record of profitability. IPO Central also found several positives in the company’s operations
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Taking the simple measure of price by earnings (PE) ratio, the stock looks expensive based on FY 2015 PE ratio of 37.2. However, this comes down to a more reasonable level of 30.2 on the basis of 2014 earnings. Since FY 2015 was an exception in terms of earnings, we can expect the company to come back to its double-digit margins in the current FY.
– IPO Central’s review of the IPO
There is quite a lot in terms of past performance to warrant this optimism and last year’s aberration has actually created headroom for margin expansion. This combination puts it in diametrically opposite to InterGlobe Aviation which has everything going in its favour right now and thus, has been steeply priced.
Looking more closely, SH Kelkar’s first quarter performance has demonstrated that it is recovering. The recovery should gather pace going forward as top line continues to grow and interest outgo declines.