Strange debut by Timbor Home; top gainer on NSE
Johnson Creado 22 June 2011

With an IPO grading of just 1/5, the stock ends at a premium 44.76% on debut

Timbor Home, which opened its innings on the bourses today, emerged as the top gainer on the National Stock Exchange (NSE), closing at Rs91.50 compared to its issue price of Rs63, a premium of 44.76% to its issue price. Opening at Rs72, the stock traded in the range of Rs72-Rs99 intra-day. The total volume of shares traded on the NSE and the Bombay Stock Exchange was 7.91 crore which is 5.38 times the issued equity shares of the company.

Timbor Home, manufacturer and retailer in the modular kitchen industry, had set the issue price of its initial public offer (IPO) at Rs63, the upper end of the price band of Rs54-Rs63. The issue was subscribed 5.78 times. The Qualified Institutional Buyers (QIBs) category was subscribed 65%, while the non-institutional investors' category was subscribed 3.22 times and the retail investors' category was subscribed 14.22 times. Interestingly, the company has such poor fundamentals that it got an IPO grading of 1/5.

The issue is equivalent to 25% of the company's post-IPO equity and will lead to the promoter's holding falling to around 50%. Other private investors hold the remaining 25% shareholding in the company.

The company raised Rs23.25 crore through the issue of 36.9 lakh equity shares. Of the total issue proceeds, the company will use Rs2.6 crore for capacity expansion, Rs4 crore for establishment of stores, Rs13.2 crore for working capital requirement and the remaining amount for other corporate purposes.

Analysts had suggested ignoring the issue on account of the company's aggressive valuations and weak financials.

Timbor Home operates as a manufacturer and retailer, having 80 stores of kitchen, door and furniture. It also operates on a franchise model. Competitors in the segment include Pantaloon, Shoppers Stop, Trent, Godrej, Durian and Lifestyle.

The company's net sales in FY09-10 was Rs51 crore. Apparently, it grew at a compounded annual growth rate of 65% in the last four years. During the same period, the company's net profit has grown to Rs1.8 crore from just Rs10 lakh. The company has very thin margins. The operating margin in FY09-10 was 10.7% and net profit margin was 3.5%.

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