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.

---------------------------------------------------------------------------------------------------------------------------

Indian stock markets crashing – What to do now?

Indian stock markets went on crashing by almost 2% on June 20th. What are the reasons behind this stock market crash and what should you be doing in such times?

This crash was mainly due to reports of bringing Mauritius fund inflows in Indian stocks markets under tax net by Indian government. Huge numbers of FII’s and foreign investors have created their investment vehicles in Mauritius to take benefits of status of Mauritius as tax heaven country.

All these investors, invested heavily in Indian stock markets, if brought under tax net, stand to lose good amount of their money they made from India and so this rush to sell stocks in Indian stock markets and send their money back to wherever their roots are before the tax treaty picture becomes clearer by Indian government.

Apart from this, there are more reasons for this crash. European debt crisis being one of them. The issue of money lent to Greece is one of them. Greece cannot repay the money back in the time frame for which it was given the money as loan. They simply don’t have the economy to do that. They don’t have income generating businesses in country who can pay government thru taxes.

US is approaching fast to the defaulting timelines without any solutions yet. They can’t payback the huge debt they carry and they can’t print more money to pay back as it would devalue the dollar as currency. It is sort of a deadlock!

On top of this, “the great Indian inflation story”, rising interest rates with corrupt Congress led government in India is making its inroad to slow the new investments in India and slow down the industrial production with overall economy.

All these issues seem to be hovering over stock markets, not only in India but world stock markets too. And to get the clearer picture, it might take another 3-6 months from today.

The best approach in such time would be to stay in side lines, wait for some more clarity on all these fronts, do not invest money in stock market as fresh investment. And if you are seating on healthy profits, consider selling stocks and re-enter at lower levels. Do some stock research, find out best stocks to buy which has lower or no debt in their books, if not great but healthy growth rate and possibility of business that is recession proof. This could be a good time to buy stocks from next 3 - 4 years perspective. I do not have any short term stock trading ideas.

I would keep searching for some good stocks to buy in such environment and post on IndianStocksNews.com regularly, if you like the ideas, do more research and start buying stocks of those companies whenever valuations are cheap for long term investing.

Feel free to share your thoughts and post a comment using below comment form.

---------------------------------------------------------------------------------------------------------------------------

MIC Electronics - What to do now?

One of the readers of Indian Stocks News, “Optimist” asked me about my opinion on MIC electronics at it’s current state. Company’s stock price in recent times has been beaten down badly in stock markets. What to do with it now?

For those who don’t know much about company, MIC electronics is a small cap stock. The company was in business of manufacturing and marketing of semiconductor chips and LED display/lights. As per recent announcement from it’s management, company has decided to go only with LED technology business in future.

MIC electronics management has already declared their choice of going ahead in business only with LED technology and it’s applications. Let’s first talk about technology. LED (Light Emitting Diode), is a tiny small piece that throws out light by taking eelctricity as input. The best part is, it takes very very less electricity as input that makes it electricity saving lighting solution. Technologywise, it is the best new era lighting technology in market. So is the LED display screens that are used for out door video displays like large outdoor TV/video screens and advertising screens.

MIC has made these two products as their primary products in business line which has tremendous business opportunities. The problem in company looks to be distrust of people in management and recent lackluster performance of company. This is because of major chunk of shares pledged by promoter and sell of InfoSTEP. Revenue and profits have nosedived due to sell of this company. But it is still a profit making company.

Looking at recent interview of MD/CEO of MIC (click here for interview), company is focussing only on LED related products and comapny should achieve big breakthrough in 2012. If this happens, company should achieve good growth depending on their efforts.

I am not saying this is very safe investment, especially looking at promoters shareholding etc. but this is also fact that promoter has invoked few lakh shares from pledged shares due to SEBI's rules. Company's book value as per June 2010 was Rs. 36.34 which is good. We will have to look for it's latest numbers as per June 2011 in near future. Company has Rs0.35 EPS for March 2011 quarter. If we estimate the EPS to be at these levels for, say next 4 quarters, it could be 1.4 and for this forward EPS, P/E at current stock price of Rs15 is only 10.70. The stock is not expensive at this rate. Company had paid dividend in 2007, 2008, 2009 when it was doing good, though not at very high dividend yield, but that shows some shareholder friendly policy.

I am invested in MIC from last 2 years, although not a big chunk of portfolio but a few thousand shares. I have a long term view and I might even average my investment at this rate in next few days. I will remain invested in this stock for long term portfolio for one reason, I know the LED technology well and MIC is the only player in India in this segment. Even if management does average, they could do okay. It is a high risk high return investment for me. It could be a bit longer wait for investors if company's plans go thru. It is a bet that I will be taking for this reason and wait for at least 3-4 years.

---------------------------------------------------------------------------------------------------------------------------

Mid Cap Stock To Buy - RIIL

I recently came across a discussion on this mid cap stock recommended as multi bagger stock to buy. What is in Reliance Industrial Infrastructure that it has potential to be a multi bagger stock for investors?

---------------------------------------------------------------------------------------------------------------------------

Mid cap stock to buy - Manaksia Ltd.

Here is a stock report on this good mid cap value stock with good dividend yield and promising growth prospects too.

---------------------------------------------------------------------------------------------------------------------------

Small Cap Stock To Buy - Fiem Industries

I recently came across discussion about this small cap stock that I felt could be a multi bagger stock in next few years. I thought to do some stock research to find out why this could be a stock to buy for long term.

---------------------------------------------------------------------------------------------------------------------------

Should you buy stocks of SUN TV and SpiceJet on plunge

Dayanidhi Maran, the latest unearthed participant (as alleged) of 2G spectrum scam is touted to be the beneficiary thru SUN TV when he was telecom minster. As result of these allegations of his involvement, SUN TV and Spice Jet stocks have crashed by 28% and 16% in a single day. Should you consider this as an opportunity to buy stocks of these companies and wait for the turmoil to get over for appreciation in stock prices?

---------------------------------------------------------------------------------------------------------------------------