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Wednesday, June 22, 2011

Do not Invest in IPO of Birla Pacific Medspa

Birla Pacific Medspa is offering initial public offer and raising around Rs 65.18 crore through this IPO. Why you should not invest in IPO of this company? Let’s see.

It is a Yash Birla Group company who would reduce the promoter's share holding to around 27% in this IPO. Another business partner, Pacific Healthcare was 50% Joint Venture partner in Birla Pacific Medspa, so the the name Birla Pacific. Pacific healthcare reduced their holding to 12.44% and through this IPO they would further reduce it to only 5%. Other private investors hold 9%.

Birla Pacific Medspa was Incorporated in 2008 for the business of beauty and healthcare treatment. It operates med spa centres with brand name 'EVOLVE'. Company has only 7 such operational centers which made Rs 1.65 crore as their sales for 9 months till December 2010. On this net sales, company faced losses of Rs 3.6 crores.

So with these negative earnings and loss making small business, this company wants to raise up to Rs 65 crores for opening such 55 centers allover India.
The company which cannot make profits with only 7 centers to manage, expecting that they would make money for shareholders, especially when promoters themselves are reducing their stocks, is a foolish expectation.

Their debt to equity ratio is 0.1 and cash flows are negative. I do not see company generating any positive returns for it’s shareholders in distant long term. Partner promoter is planning to exit the business and this IPO looks like an exit route for them at the cost of IPO investors’ money.

This IPO does not have anything in it for its IPO investors. If you wish to be kind to Birlas and “donate” (not invest) some money to Birla Pacific Medspa, go ahead and invest in this IPO.

4 comments:

  1. A greatful thanks to you for your valuable and clear-cut views about Birla Pacific Medspa IPO. I have similar opinion with you on this IPO.

    ReplyDelete
  2. tks for the comments frnd.

    ReplyDelete
  3. please inform about birla shloka......

    ReplyDelete
  4. Yash Birla grp is the worst group...they are just enjoying the investor money..but not at al working...

    ReplyDelete

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