SPS Finquest Ltd, a part of diversified SPS Group runs business operations in the fields of stock broking, depository participant, mutual fund distribution, portfolio management service (PMS) and insurance repository services. Presently, it is providing loan against securities and margin financing to its clients. The company is planning to provide a variety of loan products like IPO financing, loan against gold, loan against commodity, etc. This will not only enhance its product portfolio but will also offset the high risk involved in stock broking business.
At the issue price of Rs 75 the stock is trading at P/E of 24.1x on its FY13 EPS of Rs 9.4. Prior to the IPO the company has issued bonus shares to its promoters which has increased its P/E from about 8.0x (pre-bonus issue) to 24.1x. Its book value per equity share is of Rs 6.6 as of September 30, 2013 while its P/BV is higher at 11.3x as compared to its peers. We believe the issue price is too high and will not leave any upside for investors post listing. We recommend an AVOID to the issue.
