PE Asked for is 100
Swajas Air Charters Limited had tapped the capital markets with its IPO which opened on Monday the 26th of September in a price band of Rs 90-100. The issue did not get adequate response and was extended to end on Wednesday the 5th of October. The price band stands reduced to Rs 84-90. The issue is to raise Rs 37.50 crs.
| Price Band | Rs 90 – Rs 100 |
| Issue Size in Rupees | Rs 3750 lacs |
| Issue Size in Shares | 41,66,667 Equity Shares at Rs 90 to 37,50,000 Equity Shares at Rs 100 |
| QIB’s | 20,83,333 Equity Shares at Rs 90 to 18,75,000 Equity Shares at Rs 100 |
| Non Institutional Investors | 6,25,000 Equity Shares at Rs 90 to 5,62,500 Equity Shares at Rs 100 |
| Retail Investors | 14,58,333 Equity Shares at Rs 90 to 13,12,500 Equity Shares at Rs 100 |
| Book Running Lead Manager | Aryaman Financial Services Limited |
| Syndicate Member | India Securities Broking Private Limited |
| Isssue Opening Date | Monday 26th September |
| Isssue closing date | Wednesday 28th September |
| IPO Grade | ICRA grade 2/5 indicating below average fundamentals |
| Paid -up Capital Pre IPO | 1,12,49,536 Equity Shares |
| Paid -up Capital Post IPO | 1,54,16,203 Equity Shares at Rs 90 to 1,49,99,536 Equity Shares at Rs 100 |
| Market Cap post listing | Rs 138.75 crs at lower band to Rs 150 crs at higher band |
| Bid Lot | 60 shares |
| Bidding Amount | 1980 shares at Rs 100 or Rs 1,98,000 |
| REVISED PRICE BAND AND VALUATIONS | |
| Price Band | Rs 84 – Rs 90 |
| Issue Size in Rupees | Rs 3750 lacs |
| Issue Size in Shares | 44,64,286 Equity Shares at Rs 84 to 41,66,667 Equity Shares at Rs 90 |
| QIB’s | 22,32,143 Equity Shares at Rs 84 to 20,83,333 Equity Shares at Rs 90 |
| Non Institutional Investors | 6,69,643 Equity Shares at Rs 84 to 6,25,000 Equity Shares at Rs 90 |
| Retail Investors | 15,62,500 Equity Shares at Rs 84 to 14,58,333 Equity Shares at Rs 90 |
| Book Running Lead Manager | Aryaman Financial Services Limited |
| Syndicate Member | India Securities Broking Private Limited |
| Isssue Opening Date | Monday 26th September |
| Isssue closing date | Wednesday 5th October |
| IPO Grade | ICRA grade 2/5 indicating below average fundamentals |
| Paid -up Capital Pre IPO | 1,12,49,536 Equity Shares |
| Paid -up Capital Post IPO | 1,57,13,822 Equity Shares at Rs 84 to 1,54,16,203 Equity Shares at Rs 90 |
| Market Cap post listing | Rs 132 crs at lower band to Rs 138.75 crs at higher band |
| Bid Lot | 60 shares |
| Bidding Amount | 2220 shares at Rs 90 or Rs 1,99,800 |
Business
The company as the name suggests is a non-scheduled airline operator servicing a fleet of fixed wing aircraft and helicopters across India. The company takes on dry lease and wet lease a number of helicopters and aircrafts of its own and has become one of the key non-scheduled operators in Southern India. The company currently operates one aircraft and two helicopters. The company plans to increase the same and offer services which include general air charter services, off-shore transportation and logistics, charter tourism, medical evacuation services and operations and maintenance.
The aircraft operated by the company is Cessna Citation XL and the two helicopters are Bell 412 EP. Key customers with who the company has contracts include HOEC, Kanchi Mutt, Govt of Orissa, Murugappa Management Services etc.
Objects of the issue
The objects of the issue are as follows: –
The company plans to use the net proceeds of the IPO after deducting the issue related expenses for the purpose of acquiring a helicopter and an aircraft. Besides this it plans to set up an MRO/hangar facility.
| Acquisition of a Bell 407 Helicopter | Rs 782.30 lacs |
| Acquisition of a PC Pilatus Aircraft | Rs 941.85 lacs |
| Helicopter/aircraft acquisition related direct expenses | Rs 95.81 lacs |
| Setting up of MRO/Hangar Facility | Rs 905.03 lacs |
| Purchase of office building space | Rs 350.00 lacs |
| Working Capital | Rs 378.19 lacs |
| General Corporate Purposes |
Financials
The company has reported revenues of Rs 7.52 crs in the year ended March 2009 which have risen to Rs 32.63 crs in the year ended March 2011. The net profit after tax in the same period has risen from Rs 38.78 lacs in 2009 to Rs 134.22 lacs in 2011. The net margins are currently at 4.11%.
| year 2009 | year 2010 | year 2011 | |
| Income | Rupees in Lakhs | ||
| Income from operations | 751.01 | 2911.42 | 3248.14 |
| Other Income | 0.96 | 3.7 | 14.86 |
| Total Income | 751.97 | 2915.12 | 3263.00 |
| Expenditure | |||
| Charter operating expenses | 609.29 | 2302.97 | 2253.62 |
| Employee cost | 16.18 | 220.72 | 374.14 |
| other expenditure | 67.52 | 250.21 | 373.42 |
| Total Expenditure | 692.99 | 2773.90 | 3001.18 |
| Profit before interest dep and tax | 58.98 | 141.22 | 261.82 |
| finance charges | 0.97 | 18.18 | 50.94 |
| depriciation | 1.05 | 4.04 | 5.52 |
| Net profit before tax | 56.96 | 119.00 | 205.36 |
| taxes paid | 18.18 | 40.44 | 71.14 |
| Net Profit after tax | 38.78 | 78.56 | 134.22 |
| NET MARGINS | 5.16 | 2.69 | 4.11 |
Very clearly the company is a small company and is in the growth stage and has a long way to go. There is very little one can do with a mere 2 helicopters and 1 aircraft.
Comparisons
The company has compared itself with Global Vectra which is a listed entity and is a large player in the off shore and transportation logistics business. Global Vectra reported revenues of Rs 235 crs in the year ended March 2011 and a significant loss of Rs 44 crs. The company has a market cap of Rs 28 crs. There are other players as well who are not in the listed space but are fairly large in their operations. Pawan Hans is a government entity and is virtually the dominant player in the industry serving not only the exploration and offshore industry but also other users.
Valuations
Based on the fully diluted equity of 157.13 lakh shares at the lower price band of Rs 84, and a net profit of Rs 134.22 lacs the EPS would be Rs 0.85 and at the upper end of the price band of Rs 90 would be Rs 0.87. The Price earnings ratio would be a staggering 98.34 times at the lower end and 103.37 times at the upper end of the price band. The share is not only expensive but offers no scope for growth in the short or medium term.
The company has not paid TDS (Tax deducted at source) of Rs 132.39 lacs as of 31st March 2011. This is a serious issue and would entail penalties. The other important point to note is that the total profit is around the same amount.
Conclusion
The current crop of issues in the market are all of the expensive and with weak fundamentals. To add to the investors’ concern even the secondary market does not offer any comfort and is in a bad shape. It makes sense to skip the issue as there is no scope for making money in such an issue.
SEBI Disclaimer: – I do not intend to subscribe to the above issue.
