Amber Enterprises India Limited IPO - Should you subscribe?
Amber Enterprises India Limited IPO is the third mainstream IPO of 2018. The issue is opening on the next day of issue opening of Newgen Software. Open date January 17, 2018 and closing on January 19,2018. The tentative dates of allotment and listing are January 29, 2018 and January 30,2018. The allotment status can be checked on this link http://karisma.karvy.com.
The first IPO of 2018- Apollo Micro Systems received an overwhelming response, subscribed by 248 times approx. It was a good sign of carried forward bull sentiments in the IPO market. In December 2017, Future Supply IPO clashed with Shalby Ltd IPO. Future Supply IPO opened on the very next day of Shalby Limited which impacted poor subscription response to Shalby though fundamentals of both companies are very strong. On the last day, Shalby managed to subscribe merely 3 times while Future Supply outperformed by 8 times subscription. Both shares listed at marginal premium. However, later on Shalby slipped into further downturn while Future Supply maintained its thing premium. The same scenario is expected to be repeated in this case too. Amber Enterprise Limited has all the potentials to outshine over Newgen Software.
Ambar Enterprise Limited shall garner Rs. 600 Crore approx. through IPO. This is a mix of Fresh Issue and Offer For Sale. The company shall issue Fresh Shares up to Rs. 475 Crore and its promotors viz. Jasbir Singh and Daljit Singh shall put shares worth Rs. 62.5 Crore each under OFS arrangement. The company has set price range between Rs. 855 - Rs. 859 per share and minimum application lot size is for 17 shares.
The company shall not receive any proceeds through Offer For Sale. The company intents to utilize the Net Proceeds from the Fresh Issue towards; Prepayment or repayment of all or a portion of certain borrowings availed by the company (Rs. 400 Crore approx.), and for General Corporate Purposes.
The company is a market leader in the RAC (Room Air Conditioner) OEM/ODM (Original Equipment Manufacturer/Original Design Manufacturer) industry in India with a market share of 55.4% in terms of volume in Fiscal 2017. It is one stop solution provider for the major brands in the RAC industry and currently serve eight out of the ten top RAC brands in India.
Its key customers include leading RAC brands such as Daikin, Hitachi, LG, Panasonic, Voltas and Whirlpool. Its customers command around 75% share in the Indian RAC market in Fiscal 2017. It has built strong and long standing relationship with its customers by aligning its offerings with their business needs. It provides them with the range of additive manufacturing solutions at their doorstep by supplying them components and RACs through OEM/ODM models.
From a single factory in Rajpura, Punjab, that commenced operations in 1994, it has today grown to 11 manufacturing facilities across seven locations in India. Its manufacturing facilities have a high degree of backward integration and are strategically located in proximity to its customers facilities.
Amber Enterprises has many competitive strengths :
1. Market leadership in the RAC OEM/ODM industry in India
2. One stop solution provider for the RAC industry with high degree of backward integration
3. Strong customer relationships with the majority of leading RAC brands in India
4. R & D and product design capabilities leading to high proportion of ODM business
5. Tract record of financial performance
6. Economies of scale
7. Culture of innovation and highly experienced management
EPS (Consolidated diluted) for Fiscal 2017 is Rs. 12.80. At upper and lower price band, PE Multiple ranges between 66.80 - 67.11. The company has no any listed peer, so the offer price is over or under is not ascertainable. However, normally price at 66.80 - 67.11 PE multiple considered as OVERPRICED. Prima facie, the share seems little expensive, though the company is fundamentally strong,.
The average cost of acquisition by Jasbir Singh is Rs. 38.73 per share and Daljit Singh is Rs. 43.71 per equity share. The company recently issued shares to Ascent Investment Holding at Rs. 237.30 in March, 2017 and December, 2017 upon conversion of CCPS and CCDs.
The company's total revenues have grown at a CAGR of 19.03% from RS 979.70 Crore in Fiscal 2014 to 1652.26 Crore in Fiscal 2017 in comparison with the average revenue of the consumer durable industry, which grew at a CAGR of 11.70% over such period.
However, the company has its limitations as well. The company operates under very thin margin. PAT for Fiscal 2017 is merely 1.70% of Revenue from Operations. The industry in which company operates is such that higher PAT % can not be expected. RoNW is also under double digits for the last two years. As there is no comparison possible, the price asked by the company is justifiable or not remains unanswerable. The summary of financials are given below:
The company is availing tax benefits for Dehradun Unit I, Dehradun Unit III and HP unit. The tax benefits will expire soon in 2021-2022. The company's tax liability after the expiry shall increase which will bring down PAT marginally. Further, tax benefits available under Excise, VAT and CST are stand withdrawn under new GST Regime.
Conclusion :
The positive factor is that company is operating in niche area, investors will be very much interested to jump in. On the other hand, the company has plenty of idle capacity, operations are not in line with installed capacities. The share price set is little higher, PAT margin is very thin, dependency on limited customers, RoNW % is also not exciting. Long term investors with high risk appetite should apply, else AVOID.
Thank you for reading....Jai Hind
CA Prashant Seta
(Note : I write reviews based on my knowledge and understanding. Readers of this article should their own research before applying the IPO)
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The first IPO of 2018- Apollo Micro Systems received an overwhelming response, subscribed by 248 times approx. It was a good sign of carried forward bull sentiments in the IPO market. In December 2017, Future Supply IPO clashed with Shalby Ltd IPO. Future Supply IPO opened on the very next day of Shalby Limited which impacted poor subscription response to Shalby though fundamentals of both companies are very strong. On the last day, Shalby managed to subscribe merely 3 times while Future Supply outperformed by 8 times subscription. Both shares listed at marginal premium. However, later on Shalby slipped into further downturn while Future Supply maintained its thing premium. The same scenario is expected to be repeated in this case too. Amber Enterprise Limited has all the potentials to outshine over Newgen Software.
Ambar Enterprise Limited shall garner Rs. 600 Crore approx. through IPO. This is a mix of Fresh Issue and Offer For Sale. The company shall issue Fresh Shares up to Rs. 475 Crore and its promotors viz. Jasbir Singh and Daljit Singh shall put shares worth Rs. 62.5 Crore each under OFS arrangement. The company has set price range between Rs. 855 - Rs. 859 per share and minimum application lot size is for 17 shares.
The company shall not receive any proceeds through Offer For Sale. The company intents to utilize the Net Proceeds from the Fresh Issue towards; Prepayment or repayment of all or a portion of certain borrowings availed by the company (Rs. 400 Crore approx.), and for General Corporate Purposes.
The company is a market leader in the RAC (Room Air Conditioner) OEM/ODM (Original Equipment Manufacturer/Original Design Manufacturer) industry in India with a market share of 55.4% in terms of volume in Fiscal 2017. It is one stop solution provider for the major brands in the RAC industry and currently serve eight out of the ten top RAC brands in India.
Its key customers include leading RAC brands such as Daikin, Hitachi, LG, Panasonic, Voltas and Whirlpool. Its customers command around 75% share in the Indian RAC market in Fiscal 2017. It has built strong and long standing relationship with its customers by aligning its offerings with their business needs. It provides them with the range of additive manufacturing solutions at their doorstep by supplying them components and RACs through OEM/ODM models.
From a single factory in Rajpura, Punjab, that commenced operations in 1994, it has today grown to 11 manufacturing facilities across seven locations in India. Its manufacturing facilities have a high degree of backward integration and are strategically located in proximity to its customers facilities.
Amber Enterprises has many competitive strengths :
1. Market leadership in the RAC OEM/ODM industry in India
2. One stop solution provider for the RAC industry with high degree of backward integration
3. Strong customer relationships with the majority of leading RAC brands in India
4. R & D and product design capabilities leading to high proportion of ODM business
5. Tract record of financial performance
6. Economies of scale
7. Culture of innovation and highly experienced management
EPS (Consolidated diluted) for Fiscal 2017 is Rs. 12.80. At upper and lower price band, PE Multiple ranges between 66.80 - 67.11. The company has no any listed peer, so the offer price is over or under is not ascertainable. However, normally price at 66.80 - 67.11 PE multiple considered as OVERPRICED. Prima facie, the share seems little expensive, though the company is fundamentally strong,.
The average cost of acquisition by Jasbir Singh is Rs. 38.73 per share and Daljit Singh is Rs. 43.71 per equity share. The company recently issued shares to Ascent Investment Holding at Rs. 237.30 in March, 2017 and December, 2017 upon conversion of CCPS and CCDs.
The company's total revenues have grown at a CAGR of 19.03% from RS 979.70 Crore in Fiscal 2014 to 1652.26 Crore in Fiscal 2017 in comparison with the average revenue of the consumer durable industry, which grew at a CAGR of 11.70% over such period.
However, the company has its limitations as well. The company operates under very thin margin. PAT for Fiscal 2017 is merely 1.70% of Revenue from Operations. The industry in which company operates is such that higher PAT % can not be expected. RoNW is also under double digits for the last two years. As there is no comparison possible, the price asked by the company is justifiable or not remains unanswerable. The summary of financials are given below:
The company is availing tax benefits for Dehradun Unit I, Dehradun Unit III and HP unit. The tax benefits will expire soon in 2021-2022. The company's tax liability after the expiry shall increase which will bring down PAT marginally. Further, tax benefits available under Excise, VAT and CST are stand withdrawn under new GST Regime.
Conclusion :
The positive factor is that company is operating in niche area, investors will be very much interested to jump in. On the other hand, the company has plenty of idle capacity, operations are not in line with installed capacities. The share price set is little higher, PAT margin is very thin, dependency on limited customers, RoNW % is also not exciting. Long term investors with high risk appetite should apply, else AVOID.
Thank you for reading....Jai Hind
CA Prashant Seta
(Note : I write reviews based on my knowledge and understanding. Readers of this article should their own research before applying the IPO)
Follow us on
Facebook : https://www.facebook.com/investmentbazaarr.blogspot/?ref=bookmarks
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