Tirupati Inks has entered the capital market on 14^th September 2010 to raise Rs. 51.5 crore via the public issue, comprising of a fresh issue of 1.20 to 1.26 crore equity shares of Rs. 10 each (depending on the price at which the book is discovered). The issue, priced in the band of Rs. 41 to Rs. 43 per share, constitutes 79% of post-issue paid-up capital of the company. Existing promoters will subscribe to the extent of 22% of the issue, as per the RHP.

The issue can be termed as an FPO since the company is already listed on the stock exchange, and seeks to now list on BSE. It will not list on the NSE since it did not meet the market cap criteria of NSE. The issue will close on 16^th September for QIB bidders and on 17^th September for retail and HNI bidders.

The company's financials are dismal, to say the least. For FY10, it reported a topline of Rs. 72 crore, of which Rs. 54 crore or 75% was earned just from trading in polyester films. The net profit for the year was Rs. 2.2 crore, implying a net profit margin of just 3%. As on 31^st March 2010, it had outstanding debtors, closing stock and net current assets of Rs. 17 crore, Rs. 14 crore and Rs. 24 crore respectively, implying the intensive working capital nature of the company's business. As against this, the fixed assets were just Rs. 3.4 crore.

Present equity of Rs. 3.2 crore will expand significantly to Rs. 15.7 crore post issue, due to the heavy dilution to the extent of 79%. The existing promoters will subscribe to 22% of the i

At present, the company is heavily leveraged. On a networth of Rs. 7 crore, as on , it had total debt of Rs. 20 crore (secured Rs. 16 crore and unsecured Rs. 4 crore).  

On the lower and upper band, PE multiple works out to 6.0 and 6.3 times respectively. On a book value per share of Rs. 21.6, as on , the issue is priced at a PBV of 1.9 and 2.0 times respectively. These multiples are unreasonable for a company with limited regional presence, generating majority of its income from trading activity and earning net margin of only 3%.