Rajasthan-based home knick knack marker Priti International is issuing 7,00,800 at Rs 75. Is it worth applying to?
Find out in our unbiased review:
Priti International makes small ticket home furnishing items and accessories, some furniture, pet comfort products, bags, and other personal goods. From the website it seems that it wants to expand into other home items, specially in furniture.
It is a decent line of business. Majority of the products are exported and the competition comes from the unorganized export sector and of course, from China.
At first glance, the company does radiate a decent perception, even though the moat is of average strength.
The company is new in the sense it has purchased the sole proprietorship company of the promoter for a consideration of 1.54 crores. So, there’s no point in going into the financials.
…it is important to note that the company reported a negative operational cash flow for the period ended 31-12-17 and ended up financing its operations and investments from debt. This is because the company took over the business of the proprietor on 30 November 2017 for 1.54 crores, and that leaves a question – if the company was formed for taking over the business of the proprietor, who is now a promoter, why did it incur a cash outflow of Rs 1.96 crores from operations?
Now, it will be interesting to figure out how the company has priced the share at Rs 75.
The company justifies a price of Rs 75 a share because of
a. Experienced management
b. Global presence (but the company does not have offices overseas)
c. EPS of 3.47 on pre IPO capital. (this will further dilute post-IPO)
d. Return on Net Worth of 3.99% (Isn’t this a rather poor RoR?)
e. NAV of Rs 21 on 31-12-17
These are rather weak reasons for justifying an issue price of Rs 75.