SH Kelkar will raise Rs 210 crore by issuing fresh shares, while the US-based private equity giant Blackstone will mobilise Rs 290 crore by offloading its 10 per cent stake in the company. The issue will close on Friday, October 30, 2015.

SH Kelkar & Company’s (SHKCL) Rs 500 cr initial public offerings (IPO) hit capital market on Wednesday. The IPO comprises of a fresh issue/Offer for sale of upto 1.66 cr shares, in which Blackstone PE Fund is selling around 10 per cent share and the promoter is selling around 2.5 per cent share of the total pre-IPO outstanding shares. Shares of SH Kelkar & Company could be subscribed to in the price band of Rs 173-180 (face value of shares: Rs 10 each) via the book building route.

The company will raise Rs 210 crore by issuing fresh shares, while the US-based private equity giant Blackstone will mobilise Rs 290 crore by offloading its 10 per cent stake in the company. The issue will close on Friday, October 30, 2015.

JM Financial Institutional Securities Limited and Kotak Mahindra Capital Company Limited are the book running lead managers to the Issue, Keynote Corporate Services Limited is Advisor to the Issue and Link Intime India Private Limited is the registrar to the issue.

Here is all you need to know about the IPO and what analysts are saying

Business and Background: SHKCL is the largest fragrance and flavour company in India by revenue, with a market share of approximately 12 per cent. The company has four manufacturing facilities, three of which are located in India and one in the Netherlands, with a total installed manufacturing capacity of over 19,819 tonne annually. The company exports fragrance products to 52 countries and are an emerging flavour producer in India with exports to 15 countries.

Objectives of issue: The company proposes to use the issue proceeds for repayment/pre-payment in full or in part of certain loans availed by the company, investment in their wholly owned subsidiary KV Arochem Private Limited and general corporate purposes.

Company’s brands: The company has established brands like SHK, Cobra and Keva, which enjoy leadership positions in their respective categories and draw substantial brand equity in India. For the year ended December 31, 2013, SHKCL had a market share of 12 per cent in the Indian fragrance and flavour (F&F) industry. “On bifurcating, the company’s market share stood at 20.5 per cent in the fragrance industry and 2 per cent in the flavour industry,” Angel Broking said in a research report.

Product Offering and customer Base: SHKCL has a wide portfolio of offerings with over 9,700 fragrances, ingredients and flavour products and a large library of product formulations created over the past 90 years. The company enjoys a competitive advantage over its peers on the back of its wide product portfolio. It has a deep understanding of its customers’ requirements and preferences and has over 4,100 customers, including leading national and multi-national FMCG companies, blenders of fragrances and flavours, and fragrance and flavour producers.

Promoters and management team: Company is led by a experienced management team that has the expertise and vision to manage and grow business. Ramesh Vaze and Kedar Vaze, co’s Promoters, have over 50 years and 15 years of experience in the fragrance and flavour industry, respectively. In addition to promoters, co’s senior and mid-level management teams are also very experienced, having worked in large multi-national companies, in the fragrance and flavour and FMCG industries, with an average experience of over 20 years.

Analysts View

Angel Broking: SHKCL is valued at a P/E multiple of 40.4x its FY2015 EPS. In terms of P/BV, the company is valued at 5.1x its pre-IPO and 3.2x its post-IPO at the upper end of the price band. The brokerage house believes that the valuation is expensive, considering its low return on equity (RoE) numbers (around 12-13 per cent) and considering that they are expected to continue to remain in the same range. Further, the domestic F&F industry is not a high growth industry, expected to grow at a subtle rate of 9-10 per cent going forward. The company’s global peers Givaudan SA and International Flavors & Fragrances Inc trade at 28.1x and 20.1x their CY2014 earnings, respectively. Givaudan SA and International Flavors & Fragrances Inc have strong market shares in the global market of around 21 per cent and around 12 per cent, respectively, and deliver higher RoEs. On the other hand, SHKCL has negligible market share at the global level. SHKCL’s valuation looks expensive vis-a-vis these companies.

Angel Broking said, “We recommend an “Avoid” on the issue. Investors having conviction in the long term growth prospects of the company and the emerging consumption story in India, and wanting to enter the stock to tap this perceived opportunity could consider waiting for a possible correction in the stock price post the listing of the IPO.”

Hem Securities: The company is bringing the issue at price band of Rs 173-180 per share that will convert into P/E multiple of 30-31.5 on post issue annualised EPS of Rs 5.71. The company having established market leadership and brand name has comprehensive product offering and diverse customer base. Also company with its strong research and development skills has long standing relationships with suppliers. Hem Securities recommend investors to “Subscribe” the issue.

Entertainment firm Eros International on Wednesday sought to assuage investors on its stock price fluctuations, saying downgrading or upgrading of its shares is not a “cause of concern” as nothing has materially changed in its “strong business fundamentals”.

Entertainment firm Eros International on Wednesday sought to assuage investors on its stock price fluctuations, saying downgrading or upgrading of its shares is not a “cause of concern” as nothing has materially changed in its “strong business fundamentals”.

Reacting to reports of San Francisco-based Wells Fargo downgrading the company’s stocks, it said: “We would like to confirm that nothing has materially changed to the strong business fundamentals of the company communicated previously.

“We have significantly grown the business over the last decade and continue to be market leaders in the Indian film industry with a dominant market share of the global Indian box office.”

On the stock price fluctuations, it said: “We believe that the recent movement in share price volatility at our NYSE listed parent level and today at Indian stock exchanges are based on speculative media reports.”

Eros International shares closed on Rs 369.50 per scrip on BSE, up 4.26 per cent from its previous close.

Eros has claimed it has been rated positively by analysts such as Macquarie’s Tim Nollen on the same day as leading Wall Street bank Wells Fargo downgraded its stock.

“Another analysts from Macquarie, Tim Nollen, published a very positive report and maintained outperform rating with a USD 25 price target on the same day…on October 23,” Eros International said in a statement.

It further added that analysts downgrade or upgrade stocks of any company and that “as such is not a cause of concern”.

“Note that Well Fargo did not revise down their earnings estimate for the quarter or the year and the price target is USD 22, well above the price the stock was trading on the date it was published,” Eros said.

Eros, which has significantly grown its business over the last decade, would continue to be market leaders in the Indian film industry with a dominant market share of the global Indian box office, it added.

It further added that the company has continued its growth momentum in the second quarter as well.

“We will be announcing what we expect to be strong second quarter results in the first half of November, which will allow us to demonstrate growth in revenues, profitability and cash flow from operations. As previously announced, we expect that the company will be free cash flow positive by the end of fiscal 2016,” said Eros.

Eros International distributes films in over 50 countries, dubbed and subtitled in over 25 different languages. It has a library of over 3,000 films.

Vedanta Ltd today reported 40.6 per cent drop in consolidated net profit to Rs 973.97 crore for the quarter ended September 30 on the back of lower commodity prices. (Express Photo)

Domestic equity markets opened in red on Wednesday tracking weak global cues. Sensex opened 121.73 points down at 27,131.71.

Back home, benchmark indices fell for the second consecutive session on Tuesday. Sensex closed 108.52 points, or 0.40 per cent, down at 27,253.44 while Nifty closed 27.65 points, or 0.33 per cent, down at 8,232.90.

Below are the stocks that are likely to be in focus today

JSW Steel: JSW Steel’s ratings outlook has been changed to “negative” from “stable” by Moody’s Investor Services on sharp fall in steel prices and its resultant impact on the company’s credit profile, even as it affirmed the Ba1 corporate family rating and senior unsecured ratings for the steel-maker.

Vedanta: Challenging commodity prices pulled down the consolidated net profit of metals and mining conglomerate Vedanta Ltd by 40.6 per cent to at Rs 973.97 crore for second quarter of FY16, even as it expects a better second half of the year.

Bharti Airtel: Bharti Airtel on Tuesday said its board has approved merger of wireless broadband firm Augere’s India operations with the company.

Strides Arcolab: The pharma company on Tuesday reported a consolidated net profit of Rs 18.97 crore for the quarter ended September 30, 2015.

Bharat Forge: Bharat Forge on Tuesday said it is reorganising operations of its European subsidiaries to reduce costs and facilitate tax and fiscal consolidation.

Eros International Media: The entertainment company on Tuesday sought to assuage investors on its stock price fluctuations, saying downgrading or upgrading of its shares is not a “cause of concern” as nothing has materially changed in its “strong business fundamentals”.

Tata Communication: The company reported a consolidated net profit of Rs 6.02 crore for the quarter ended September 30, 2015.

Ceat: The tyre maker posted 30.41 per cent increase in consolidated net profit at Rs 107.4 crore for the second quarter ended September 30, primarily due to softening of raw material costs.

Dabur, TRF, Indian Hume Pipe, Nelco, Greenply, Ambuja Cements, Shanti Gears, JSW Energy, Tata Elxsi, Torrent Power, Syndicate Bank, Just Dial and ABCIL are some of companies which may announce their earnings on Wednesday.

Indeed, most IPOs this year have been mid-sized and the street is yet to see larger companies hit the market. (Graphic: Sanjay Tambe)

India’s IPO market could well see R10,000 crore being mopped up for the first time in six years following the good response the InterGlobe Aviation initial public offering received on day one, report Ankit Doshi and Pavan Burugula in Mumbai. The IPO was subscribed 0.87 times on the first day of the issue, stock exchange data showed.

After a four-year lull, Indian companies have raised about R7,500 crore via IPOs so far in 2015. Should the issues of InterGlobe and SH Kelkar be successful, fund-raising via this route could hit around R11,100 crore this year, making it only the seventh time ever that the five-digit mark has been crossed, data from Prime Database showed.

However, as Prime Database CMD Prithvi Haldea pointed out, the last few issues have seen limited participation by foreign portfolio investors and retail investors. “Of the 16 IPOs so far in 2015, retail books of six issues have failed to get fully subscribed,” Haldea observed.

Indeed, most IPOs this year have been mid-sized and the street is yet to see larger companies hit the market. Dharmesh Mehta, MD and CEO, Axis Capital, believes the primary market has much larger potential and that Rs 10,000-11,000 crore is a small number. “Large IPOs are typically seen in the infra space but that is not in good shape right now, so we need to wait,” Mehta said.

Earlier this month, the world’s largest operator of mobile phone services, Vodafone Group, announced its plans to list its Indian subsidiary. The rise in emerging markets (EM) as an asset class helped India’s primary market mobilise more than Rs 1 lakh crore between 2007 and 2010. Data showed that Indian corporates raised Rs 37,534 crore through IPOs in 2010 — the highest ever. However, in the aftermath of the global financial crisis, more than 60 companies scrapped their IPO plans between 2011 and early 2014 despite valid regulatory approvals, leading to expiration of fresh paper worth Rs 65,000 crore, data showed.