Avoid Timbor Home - IPO Note (Keynote Capitals)

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Issue Highlights

Price Band                                                      :    Rs54 – 63  per share

Minimum Bid Lot Size                                    :    100 Equity Shares

Maximum Bid Lot Size                                    :    3,100 Equity Shares

IPO opens during                                            :    May 30 – June 2, 2011

Book Running Lead Manager                          :    Corporate Strategic Allianz Limited                                                      

To list on                                                        :    NSE & BSE

IPO Grading                                                    :    1 / 5 (CRISIL)

PE                                                                   :    17.59x (based on base price)*

                                                                       :    20.25x (based on cap price)*

Market Cap post-listing                                   :    Rs92.97Cr or $20.89mn (based on the cap price)

Market Cap of Free Float                                 :    Rs48.87Cr or $10.98mn (based on the cap price)      

*Based on FY10 EPS

IPO of 3.69mn equity shares of Rs10each, aggregating to Rs23.25Cr or $5.22mn (at the cap price).

Executive Summary

Ø  Timbor Home Ltd. (THL) is engaged in the manufacturing of modular kitchens, furniture, doors & door frames and kitchen baskets and accessories. It operates as a manufacturer-retailer having a Pan-India presence with more than 80 exclusive stores of kitchen, door and furniture retail outlets operating on franchise model.

Ø  The furniture industry in India is estimated to be worth €5bn, out of which, the wooden furniture accounts for €750mn. The major part i.e., 85% of furniture sector in India consists of the un-organized sector while the remaining organized sector is made up of manufactures and importers catering to the various segment of the industry.

Ø  CSIL Milano has classified India as one of the 14 large furniture markets in the world. This is in view of the fact that India has a middle class population of over 400 million, with a purchasing power on the upswing.

Ø  Modular kitchen market in India is still at a nascent stage but has tremendous growth potential. Market has been witnessing a growth rate of 50% YoY.

Ø  The promoters of THL are well experienced and are well versed in the building material and timber industry since the last 15 years.

Ø  THL manufactures almost 75% of the components that go into making a modular kitchen, the major strengths includes raw material sourcing to finishing.

Our View

Looking at low brand recall, no provision for tax for first 9 months of FY11 and small size of the operations, we advise investors to skip the issue.