SH Kelkar IPO: Social Media Compendium

The Indian primary market is back in action with big names lining up for public offers. CCD IPO just managed to cross the line via institutional investors, the retail and HNI category were in a cautious mood. Indigo IPO which opened on 27th Oct has already created a lot of furore with its hefty dividends to promoters, negative net worth and high pricing.  S H Kelkar, largest domestic producer of fragrance is another name in the IPO bandwagon which opens for subscription on 28th to 30th Oct 2015.

The Rs 500 Crore SH Kelkar IPO has been priced in the range of Rs 173-180 and includes a fresh issue of shares worth Rs 210 crores which will flow into the company. The rest of the portion is an offer for sale by Private Equity Firm Blackstone Group and the promoters. The company is operational since 1922 as a manufacturer of Industrial Perfumes in British India and enjoys a 20% market share in the fragrance industry, according to a market research study.

Pros and Cons

The company has a well-diversified portfolio in the fragrance industry with its “Keva” and “Cobra” Brands. The client base is equally diversified with no client contributing 5% of its revenues. The company has been a big name in the Rs 4000 Crore fragrance industry and has been focusing on expansion in terms of client base (MNCs), geographical and technology strengthening.

On the contrary, company has a huge dependency in the FMCG Sector which is a cyclical industry. The company has a loan book of 180 crores and most part of this IPO will be deployed to retire the debt of the company and subsidiaries. The company is operating at an optimum capacity utilization and is unlikely to go for capex in the next few years. S H Kelkar also has no direct competitors in the Indian capital markets and thus has no benchmarks to gauge the valuations.

Social Media Outlook

I used various social media listening and analysis tools in an effort to capture social media vibes and overall sentiments around this IPO. The timeline chosen for the analysis was from 21st-Oct-15 to 27th-Oct-15.

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How Social Media perceives Indigo IPO?

The long awaited airline IPO or Interglobe Aviation which operates Indigo is set to hit the primary markets, from 27th to 29th October 2015. The company is coming out with Rs 1272.2 crore issue at a price band of Rs 700-765, offering 1.66 Crore Equity Shares. Besides this, company also planned to offer up to 26,112,000 additional chunk of shares via OFS aggregating the share sale up to Rs 3268 Crores. However, on the first day of their IPO roadshow (19th Oct) few of the promoters decided to offload less shares as part of OFS, thus IPO size came down by 250 cores to Rs 3018 Crores at the highest band.

Turn-ons vs Turn-offs

Indigo, despite being a component of a very volatile airline industry has seen exponential growth in the last few years.  The company has been profitable in 7 out of 9 years of its existence and has focused only on the Low Cost Carrier (LCC) approach for its survival. The LCC operations means sticking to single aircraft type, low fares, no-frills approach and concentrating on “point to point operations”. The company has the highest market share of 37.4% in domestic operations as on 30-Aug-2015.The company also has the highest 11.4 hours per day of aircraft utilization and average age of 3.12 years (youngest fleet) amongst the domestic carriers.

On the flip side, negative net worth and whopping dividend outflow to the promoters have been the most concerning pointers. The RONW was very good since last years but suddenly tanked into red as on Q1 of the ongoing fiscal. The whopping dividend to the promoters just before the IPO has raised eyebrows but company justified it that they have been always investor friendly and will continue this practice even when the company goes public. The negative net worth was also attributed to the dividend outflow to the promoters.

On a thorough analysis, the company paid 80% of the profits as dividends in FY14 and 83% of the profits as dividend in FY15. Analysts have also questioned Indigo’s approach of paying hefty dividends and not building reserves or lowering debt which tantamount to mammoth Rs 3912 Crores as on Jun 30, 2015. The industry and subsequently company also enjoys a huge advantage of lower  oil prices and there is no guarantee that crude will continue to be at this bottom or trough over the long run.

Amidst all these favourable and unfavourable pointers, the IPO price band of 700-765 has been also questioned by the analysts. The analysts and brokerage house feel IPO pricing is on the higher side and company is quoting a huge premium for the all advantages it relishes in the airline industry.

Social Media Outlook

In an effort to capture social media vibes and overall sentiments around the Indigo IPO. I used  “Talkwalker”, a Social Media Listening and Analysis tool. The timeline chosen for the analysis was from 20th-Oct-15 to 26th-Oct-15.

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Coffee Day Enterprises IPO: Social Media Analysis

Coffee Day Enterprises Limited (CDEL) Rs. 1150 Cr IPO closed on 16th Oct with an over-subscription of 1.81 times. It was the biggest IPO in three years since Bharti Infratel in Dec 2012. Also, huge expectations were set on this one, hoping that this will be the initiator of much awaited revival in the primary market. On the contrary, a muted response was witnessed from all categories of investors in their subscription figures (QIB: 4.39, NII: 0.54, Retail: 0.90 and Employees: 0.86).

On preliminary analysis CDEL which owns a big brand CCD has lots of positives: It acts as a holding company for diversified business such as ITES (Mindtree), Logistics (Sical Logistics) and Financial Services (Way2Wealth Securities Ltd.). The promoter, VG Sidhartha has a good reputation in the Industry and CCD is a well-known brand having presence in almost all major Indian cities. On the flip side, the major negative for CDEL is its dreadful financial performance which continues to sink into hefty losses year after year.

Amidst all the hype of a big bang IPO, CDEL just managed to sail through on the last day as the investors analyzed all the positive and negative aspects about this IPO. The negative sentiments outnumbered the positives which is reflected in the dismal subscription numbers.

I analyzed the CDEL IPO from the Social Media perspective to gauge the overall sentiment around the same.

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