I have generally observed that during a bear phase in the market, companies defer their fund raising plans. I was going through the IPO column of NSE and came across 3 companies. Two of them had already announced their plans however, one, SRS Limited’s IPO will open on August 23. I found this company a bit interesting and hence thought of doing some research on the same. Here is what I found.

Company and business

SRS Limited is a diversified company with a business portfolio which includes cinema exhibition, food & beverages, retail & manufacturing and retailing of jewellery. SRS Limited was incorporated in August 2000 with the objective of becoming a FMCG company. Initially it came as SRS Commercial Company Limited and was later renamed to SRS Entertainment Limited in January 2005. The retail arm of the group is consolidated under two brands namely SRS Value Bazaar and SRS Fashion Wear. The Company has 23 retail stores in North India. SRS cinema operates in six cities with 11 properties having 30 screens and 7608 seats. SRS Food court runs under the SRS 7 dayz brands under the name “Punjabi Haandi” which runs 11 food courts across north and Central India.

Sectors’ summary

Film Exhibition has a huge scope of expansion. As per an industry survey, the screen density in India is less than 12 screens per million which is quite low compared to other developed countries.

Food & Beverage industry has grown significantly over the years. According to the industry source estimates, the industry will reach by $300-350 billion by 2015 from an estimated $150-200 billion in 2006-2007.

Retail Sector industry in India has grown at a CAGR of 10-12 per cent. Apart from this the industry was impacted by economic condition. In coming days it is expected to revive from the slowdown.

Gems & Jewellery market is one of the leading contributors to India’s export revenues. The Indian jewellery retail market was estimated to be about Rs. 973 billion in 2009-10. Gold jewellery accounts for around 80 per cent of the Indian jewellery market.

Objective of the issue

The company aims to raise Rs 203-227 crore through the issue of 3.5 crore equity shares of face value Rs 10 each with an issue price of Rs 58-65. Expansion across business segments being the primary aim. Various expansion plans are-

  • Setting up movie screens in 15 locations across India with 51 screens and approximately 13,840 seating capacity
  • Setting up of 29 new Retail stores in various locations across India
  • Setting up of 17 new jewellery retail outlets by the end of 2013
  • Setting up of 33 additional food & beverages outlets with an estimated area of 181,500 square feet by the end of 2013.

Risk factors

SRS Limited has had negative cash flow in the past three years. The Company’s cash flows from operating activities have been negative in the financial years ended 2009, 2010 and 2011 mainly because of increase in the Company’s operations which have resulted in substantial increase in working capital required by it. The promoters of the company are involved in certain proceedings which could affect the business. As per the financial statement as on 31 March 2011 of the company it has some contingent liabilities which may adversely affect the financial position of the company.

Key financials

Cash flow of the company for last three years:

 

 

 

 

Profit and Loss Summary of Last two years :

 

 

 

IPO GRADING

SRS Limited grading is done by ICRA and has been assigned ICRA IPO grade of ‘3’ to the proposed IPO reflecting average fundamentals.

OVERALL VIEW

It is advisable to subscribe to the IPO as there are huge expansion plans of the company. The company is clear about its objective and good scope of diversified sector gives a positive signal. Despite the negative cash flow, company earns a huge profit after tax which further puts a SUBSCRIBE to IPO.

Author: Satish Tayal, MBA (ISBM), is a intern at Kredent Group.

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