IPO Review: Timbor Home

 

Gujarat-based Timbor Home, a furniture manufacturing and retailing firm, is launching an initial public offer aggregating 36,90,000 equity shares to raise around 23.2 crore at the upper price band. The fresh issue is equivalent to 25% of the company's post-IPO equity and will lead to the promoter's holding falling to around 50%. There are other private investors who hold the remaining 25% shareholding. Of the total issue proceeds, the company will use 2.6 crore for capacity expansion, 4 crore for establishment of stores, 13.2 crore for working capital requirement and the remaining amount for other corporate purpose. Considering its aggressive valuation and weak financials, investors can give this IPO a miss.

BUSINESS & INDUSTRY

The company operates as a manufacturer and retailer, having 80 stores of kitchen, door and furniture. It also operates on a franchise model. It has three manufacturing units — two in Ahmedabad and one in Anand in Gujarat.The company believes that the total Indian furniture market is worth 36,000 crore with the organised sector accounting for only 15% and is growing at 30% CAGR. The big players in this segment include Pantaloon, Shoppers Stop, Trent, Godrej, Durian and Lifestyle.

FINANCIALS

The company's net sales in FY10 were 51 crore. It grew at a compounded annual growth rate of 65% in four years. During the same period, the company's net profit has grown to 1.8 crore from 10 lakh. The company has very thin margins with a very volatile history. It operating margin in FY10 was 10.7% and net profit margin was 3.5%. After the IPO, the debt-equity ratio of the company would be around 0.3. For the first nine months of FY11, the company's working capital requirement has gone up drastically. Its working capital days have increased to 217 days from 184 days in the past one-year. Its sundry debtors have almost doubled for the first nine months of FY11 as against FY10. Also, the cash flows from operating activities have been negative over the past six years as the company is in a growth phase.

VALUATIONS

The company has given the profit before tax of 3.06 crore but not given the profit after tax for first nine months of FY11. Assuming a tax rate of 33%, the company-annualised profit is 2.73 crore. This gives an earning per share of 1.9. At the upper price band of 63, the company demands a priceearning ratio of 33.3, post dilution. There are not many comparable listed peers in this category. Acrysil, which is in the manufacturing and retailing kitchen products, is trading at a multiple of 5.7. Given this, the company has priced its IPO very aggressively and investors can avoid it.

 

IPO Details

Company: Timbor Home

Issue Date: May 30 – June 2 '11

Issue Size: 23.2 crore

Price Band : 54-63 per share