Bhatia Communications & Retail (India) Limited

Started in 2008, Bhatia Communications & Retail (India) Limited is Surat, Gujarat based company engaged into retail and wholesale distribution business of mobile handsets, tablets, data-cards, mobile accessories, mobile related products etc. Company sells smartphones of all the brands including Apple I-Phone, Samsung, OPPO, GIONEE, VIVO etc, mobile related products, tablets, data cards, accessories under one roof through its owned 72 retail outlets and 24 franchisee located all over the South Gujarat region including Surat, Vapi, Valsad, Navsari, Vyara etc. Company also provide credit/EMI facilities to its customers for buying its products for which it has tied up with major leading credit houses like Bajaj Finserv, Capital First etc.  Company purchases the phones either from distributors or directly from the manufacturers. Bhatia Communications have 84 full time employees. On financial performance front, BCRL has posted turnover/net profits of Rs. 104.12 cr. / Rs. 0.35 cr. (FY14), Rs. 110.57 cr. / Rs. 0.34 cr. (FY15), Rs. 96.08 cr. / Rs. 0.31 cr. (FY16) and Rs. 133.49cr. / Rs. 0.48 cr. (FY17). For H1 of FY18, it has earned net profits of Rs. 1.31 cr. on a turnover of Rs. 85.24 cr. It suffered a setback in FY 16. Sudden jump in first half top and bottom line is surprising, specifically the bottom line which increased in may fold. For last three fiscals it has posted an average EPS of Rs. 7.22 (on pre-bonus equity) and Rs. 0.82 (on post bonus equity) and an average RoNW of 10.09. On post bonus basis, asking price is at a P/E ranging from 153 to 183 and at a P/BV of 11 plus on the basis of its NAV of Rs. 13.34 as on 30.09.17 and at a P/BV of 3.63 on the basis of post issue NAV of Rs. 41.33, thus issue is exorbitantly priced. P/Es of its listed peers are Vmart (75), V2 Retail (90) and Trent (105). If we annualise latest earnings and attribute it on fully diluted post issue equity then asking price is at a P/E of 36, but the sustainability of profitability is a major concern as its operating in one of the highly competitive market segment. On merchant banker's front, this is the 24th mandate from its stable in last three years. Out of last 10 listings, 2 opened at discount, 2 at par and the rest with a premium of 5% to 20% on the day of listings. As per financials, top line has shown consistent growth except FY16 and bottom line remain similar, RoNW is 10.09% for last three fiscals and issue is fully priced as per latest earnings. But sudden jump in net profit for H1 of FY18 is very surprising. Company operates in wholesale and retail business of mobiles & related items, which is growing at the same time very competitive. So we give NEUTRAL rating to this SME IPO.

• 1 Mr Sanjeev Bhatia
• 2 Mr Nikhil Bhatia
• 3 Mr Harbanslal Bhatia