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September 14, 2010Tirupati Inks is a micro cap company which has come out with a Follow on Offering (FPO) of Rs 50 crores ( $11 million) out of which around $2.2 million will be contributed by the promoters.The promoter stake will fall to around 20-25% from the 44% at present.Most of the money that will be raised will be used to set up a speciality ink factory for which around $2 million has been already spent.Note the public holding will go upto 65% post this issue which is a significant portion.A small company Aashika is managing the issue.Tirupati Inks is listed in one of India’s defunct stock exchanges the Delhi Stock Exchange.
The company will have a market cap of around Rs 65 crores or $14.5 million post the issue.The valuation of the company seems quite rich at around 30x trailing earnings.The company is a bit player in a bit market with negative operating cash flows the last 2 years.It easily places itself in the Junk Category of primary market issues which have hit the Indian markets in the last few months.Despite its sorry fundamentals don’t be surprised if you see the stock going up 100% on the day of the listing .Recent junk companies like Aster Silicates,Prakash Steelage are being brazenly manipulated without any repurcussions.Here is a few points about this company from the DHRP.
1) Company has grown topline a lot as it is heavily involved in trading of polyester film.Its core ink business acounted for only 30% of its total revenue in last fiscal quarter.Bottom line on the other hand remains subdued as the ink business is a low margin business.5% Net Margin is typical for this sector making it risky to invest in small players.
2) Its GM is 15% and Net Margin is around 5%.Its total marketshare is miniscule in the Ink Market which is dominated by MNC’s like Microink and DCI.Even these companies trade at 15x P/E making the 30x P/E exhorbitant.Basically the investors in the issue will fund the whole company as the company only has a net worth of Rs 6.8 crores or $1.4 million
3) Heavily indebted with around $4.2 millin in debt paying around 13% in Interest. In case the ink expansion does not work out expect your money to go down the drain.
Summary
Why would anyone want to invest in such a sorry stock is beyond me but I have seen even worse companies list so don’t get surprised.The company is basically is using all the investor’s money to become a decent business.Its current business with less than $1 million in fixed assets and $500k in profits is not worth putting money into.So if you are a super high risky investor then this stock would make sense for you.
4 Comments
Well well well. You also seem to be one of those safely ensconced into a make believe high pedestal of ‘experts’ whose godly predictions are expected to be a guide into a complex maze of equity investment in India for poor mortals like me.
Yes, me the gullible investor, has sometimes gained from your advice. Sadly, advices such as yours have often made me either lose money by accepting your advice to invest or lose opportunity by accepting a ‘not to invest’ suggestion.
They say that there are 16 IPOs that are slated to open this month. May be we should analyse your predictions on these offers (on a timespan of listing day, one month or one year) and decide your ability/authority to guide us.
Your advice on Fatpipe Networks did not help me. Hope what you say on Tirupati Inks or others do not go wrong.
Ashish,
I am by no means a godly predictor.I am as fallible as the next guy and am not guiding you into equity investment.Unfortunately in India,the information for retail investors is pathetic.Even for Fund Managers,the information quality is suspect as well.One of the easiest and safest ways to invest is through NiftyBees ,that is my only advice to equity investment.
The recent slew of Junk IPOs are nothing more than an opportunity to fleece the retail investor through the lure of listing gains.You are better off playing the casino that looking for Day 1 Gains.I am glad that you are keeping a track of my predictions (most of which are to avoid).I am a hard man to please given there are hundreds of alternative options for my money.Also how did the fatpipe advices not work for you since the issue never got listed .If you want to see my prediction just look at Aster Silicates,the issues price , the listing shenangians and the current price.Expect some of these things to happen with Prakash Steelage,Midfield and others also.
Also Tirupati,Career and others might be mispriced for a long time.I am giving you a fundamental analysis and as we know the markets can remain mispriced longer than you can remain solvent.Please keep reading this blog ,it good to have constructive criticism.
Abhishek
[…] of Junk that is being listed would fill out a giant scrapyard with issues like Prakash Steelage,Tirupati Inks,Sea TV,Aster Silicates etc. etc.The list is really long and most of these issues have bombed on […]
the management of tirupati inks is most correpted and in flexible packaging sector every body know they are the mfg. of very poor quality inks and for that they are rejected from every where in the country and all the data made by this company is fallse and all the turnover they have showed is absolutely fallse and baseless because in place of inks they have despatched water in empty bareel in the name of inks just to increase their turnover before openning ipo just to cheet the investor, so the company has no potential ,no ink market and the company is running with below qualified person and even they cant paid the salry to their people because of poor fund and thier chairman is known as a big cheeter in packaging sector. so every body should be cautious before purchase of this script.
Read more at: http://profit.ndtv.com/news/comment_add/tirupati-inks-share-ends-down-15-in-volatility-trade-on-bse-debut-104016?cp