07 September 2014

Technicals: SBI, ITC, Infosys, Tata Steel, Reliance :: Business Line

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Index outlook: The charge of the bull brigade :: Business Line

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Why I Still Don’t Like MCX : Prof. Sanjay Bakshi, MDI Gurgaon

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Why I Still Don’t Like MCX : Prof. Sanjay Bakshi, MDI Gurgaon
Links:



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Sharda IPO: Grey Market Premium, Expected Listing Price, Kostak Price (Minimum Application)

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Issue Name
Price Band
Grey Market Premium
Listing Price
Kostak Price
(Minimum Application)
Snowman Logistics
Rs 47
23-24
Rs 70
--
Sharda CropChem
Rs. 145 to 156
54 to 55
Rs 200
 900
(Bid Lot Min. : 90 Shares)

Expect Sharda CropChem IPO to be oversubscribe 3-4 in retail. Apply minimum lot (90 share) for Rs 14,040.


�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

Sharda IPO: Retail subscription expect: 3-4x; HNI 200x!!

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Sharda IPO:

Retail subscription expect: 3-4x;

HNI 200x!!

IndiaER expect: Buy minimum lot (90 shares) for Rs 14,040


�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

Sharda Cropchem gets anchor investors (NSE website) Link and Picture

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Apply for Sharda Crop IPO for listing gains: Ajcon Global

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Sharda Cropchem (SCL) is coming out with an initial public offering (IPO) of 2.3 crore equity shares for subscription on September 5. The issue is priced at Rs 145-156 per share and the company intends to raise Rs 352 crore at the upper end of the price band.
Ajcon Global's report on Sharda Cropchem IPO
SCL is a crop protection chemical company engaged in the marketing and distribution of a wide range of formulations and generic active ingredients globally. SCL is also involved in order based procurement and supply of belts, general chemicals, dye and dye intermediates.
The company has an asset light business model whereby it focuses on identifying generic molecules, preparing dossiers, seeking registrations, marketing and distributing formulations in fungicide, herbicide and insecticide segments through third party distributors and its own sales force.


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Sharda Crop's fabulous profit margin raises doubt: VS Fernando, Best IPO Analyst (LINK)

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Sharda Cropchem: Agrochem’s current industry P/E may justify price-band though the ‘marketing’ company’s fabulous profit margin raises doubt.
The IPO
The present IPO is an offer for sale of 2.26 equity shares of Rs 10 each from the company’s existing shareholders: HEP Mauritius Ltd (1.43 crore shares), Sharda Bubna and Ramprakash Bubna (41.17 lakh shares each). The offer is made through book-building route with a price band between Rs 145 and Rs 156. The issue constitutes 25 percent of the capital of the company. Investors should apply for a minimum of 90 shares and multiples of 90 thereafter. Edelweiss Financial Services and IDFC Securities are appointed as book-running lead managers while Edelweiss Securities and Sharekhan are acting as syndicate members.
IPO Object
The main object of Sharda’s IPO is to derive benefits of listing and to carry out the offer for sale by the selling shareholders. In other words, the entire issue premium of over Rs 304 cr would go to the selling shareholders and not the company.
Grading
Being an offer for sale, the IPO has not been graded by any rating agency.
Company Background
Incorporated in March 2004 as Sharda Worldwide Exports Pvt Ltd, the company’s activities were dominated by export-trading till fiscal 2013. The company changed its name to Sharda Cropchem Ltd (SCL) only in September 2013. As regards the people behind SCL, the promoters Sharda Bubna and Ramprakash Bubna claim to have engaged in dealing of dyes and dyes intermediates since late eighties through their proprietary concerns viz. Sharda International (1987) and Bubna Enterprises (1989). The businesses of the proprietary firms were transferred to SCL in April 2004. 
Business profile
SCL presents itself as a crop protection chemical company engaged in the marketing & distribution of wide range of formulations and generic active ingredients globally. The company is also involved in order-based procurement and supply of belts, general chemicals, dyes & dyes intermediates. The company claims, its core strength lies in identifying generic molecules, preparing dossiers and seeking registrations.  
SCL does not have a manufacturing facility of it own even though its net block is valued around Rs 200 cr. According to the company, the ‘net block’ is predominantly of foreign licences for its molecules which are essentially intangible assets. Until fiscal 2013, the company’s revenue was dominated by trading and for the first time in fiscal 2014, manufactured goods-sales overtook trading revenue.  The company claims to get its manufactured goods on job-work basis from third parties.  The company’s entire revenue is derived from exports.
Financial Performance
SCL’s revenue grew from Rs 203 crore (cr) in fiscal 2010 to Rs 556 cr in fiscal 2013. Trading revenue accounted for 81 percent in 2010 which came down to 60 percent in 2013. In fiscal 2014, the top line witnessed a negative growth to Rs 532 cr as trading turnover dropped from Rs 335 cr or 60 percent to Rs 236 cr or 44 percent. However, export of manufactured goods has steadily increased from Rs 38 cr in 2010 to Rs 296 cr in 2014. The company’s net profit has grown from Rs 13.29 cr in 2010 to Rs 84.50 cr in 2014. An interesting aspect of SCL is, though predominantly a trading company, its operating margin is as attractive as 22.5 percent which is more than double of the best in the industry. 
The company’s capital, which was at Rs 1.38 cr in 2004, was enhanced to Rs 15.18 cr in 2007 through a bumper 10:1 bonus issue. Post-bonus, the company made private placements in 2008 thereby enlarging the equity to Rs 18 cr and collected Rs 94 cr premium. In June 2011, it made another bonus issue in the ratio of 4:1 taking the equity to over Rs 90 cr. On the enlarged equity, the EPS worked out to Rs 9.37 for fiscal 2014.  The ten-year old company joined the dividend list in fiscal 2012 (10 percent). For 2013 too, it paid 10 percent which was hiked to 20 percent in fiscal 2014. This worked out to a payout of 21 percent.
Prospects
Even though SCL does not have any manufacturing base, the company is confident of maintaining its growth on the strength of its core competency in registration of molecules, strong sourcing capabilities and global distribution network. The company’s current dividend base itself gives a yield of 1.3 percent on the offer price.
 
Valuation & Perception
Sharda is asking for a valuation of Rs 1300-1400 cr at a price band of Rs 145-156.  The price band gives 15-16 P/E which compares well with the industry peers. At the offer price, SCL’s book value is discounted 2.5 to 2.7 times.  Perhaps, one factor that may weigh against the valuation is the absence of any tangible asset. The non-promoter shareholder whose average cost is less than Rs 70 is offloading his entire holding through the IPO. If the profit margin is so convincing and also if the prospects are so promising, why should the Mauritius shareholder dispose all his holding?
Lead Manager’s Track
For managing the offer for sale, SCL has hired two investment bankers viz. Edelweiss Financial and IDFC Securities whose track record is a mixed bag.  Whereas the two issues managed by IDFC in recent years are currently quoting at a premium, most of the IPOs handled by Edelweiss are languishing below the offer price even in the current boom. The only solace is, Wonderla, lead-managed by Edelweiss in 2014, is currently quoting nearly two and a half times its offer price.




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We are cash-rich; IPO to meet SEBI norms: Sharda Cropchem (moneycontrol)

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We are cash-rich; IPO to meet SEBI norms: Sharda Cropchem
Sharda Cropchem, a crop protection chemical company entered the primary market with its initial public offering (IPO) with Rs 352-crore public offer, essentially to adhere to SEBI public shareholdings norm of creating a 25 percent public float, says RV Bubna, CMD, Sharda Cropchem.
Bubna feels it is not wise for their business to invest in plant and machinery and therefore, the company invests in agro chemical registrations. They have recently entered into the biocide segment and acquired several registrations from the existing registration holders, in Europe and China. Currently, they have 1,200 registrations globally and further registrations are anticipated to grow at 15-20 percent, he says in an interview with CNBC-TV18’s Latha Venkatesh and Ekta Batra.
Cash-rich Sharda has an asset-light business model with zero debt, he says adding that they have Rs 190 crore cash in hand as of March 2014. In addition, Bubna expects margins to be above 40 percent hereon.
Below is the edited transcript of the interview:
Q: What is the reason for this IPO as the company has cash surplus of Rs 200 crore and none of the money raised to going as investment into the company?
A: We had invited a private equity investor into our company in 2008 and after six-and-a-half years, that fund is coming to close, so we have to give them an exit. The purpose of this IPO is mainly to provide our private equity investor an exit and because of SEBI’s requirement - minimum 25 percent shares have to be issued to public. So, balance shares are being offered by the promoters in this IPO.
Q: One of the things that have stood out is that the company has not reported any losses for the last 27 years. In FY14 also, the company did a profit of around Rs 107 and analysts expect that the company could grow anywhere between 20-25 percent going ahead. Is it achievable?
A: It is not difficult.
Q: Can you help us explain the business model of the company as it seems to be very different from other listed agrochemical companies in India?
A: We are dealing in agrochemicals and agrochemicals have an impact on soil, underground water, environment, health of the people. So, every government wants to regulate and allow only the quality products to enter into their country and this process is controlled by way of registrations in every country and these registrations are very important process. It also acts as an entry barrier for non-serious companies to introduce their product into all the countries. We invest our efforts and capital in obtaining these registrations. The registrations are highly capital-intensive investments and they also require a lot of time and patience.
Q: You don’t have any tangible assets like land, building and machinery?
A: In our field, there is enough capacity in terms of plant and machinery globally and mainly in China. Therefore, we feel that it is not wise to invest in plant and machinery, which is an easier way of investment and very easy to duplicate. We prefer to invest into intellectual property like registrations, which is more rewarding than an investment in the plant.
Q: Any threat of competition either local or global for the company?
A: The registration process is very time consuming and highly investment oriented, so these two factors discourage other people to come into this field and we do not see much of a competition coming into our business.




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Shemaroo IPO update: Retail to get 10% discount

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Shemaroo IPO update: Retail to get 10% discount

150 Crore IPO
likely to open around 15/16 Sept


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Next IPOs: Sharda , Shemaroo, Monte Carlo. Great Eastern Energy, Adlabs and Lavasa also expect

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After Sharda Cropchem
Rs 350 Cr IPO
Opens 5th Sep (Already Open)
Closes 9th Sep (Tuesday)

Next IPOs are:

Shemaroo Entertainment IPO
Rs 150 Cr IPO
Opens on 15th or 16th Sep (tentative)

Then, we will have

Monte Carlo
Rs 500 Cr IPO
Opens on 22nd Sep (tentative)


We also expect

Great Eastern Energy
End Sept/early Oct (likely early Oct)

Adlabs Entertainment
End Sept/early Oct  (likely Oct)

Lavasa Corp
End Sept/early Oct  (likely Oct)


�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��