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Shankara Building Products Ltd - IPO Note - Sushil Finance

Posted On: 2017-03-23 23:00:36

Shankara Building Products mix is one of the leading organized retailers of home improvement and building products in India. As on December 31, 2016, the company operated 103 Shankara BuildPro stores spread across 9 states and 1 union territory in India. It caters to a large customer base across various end-user segments in urban and semi-urban markets through its multi-channel sales approach, processing facilities, supply chain and logistics capabilities. The company's sales cater primarily to large end-users, contractors, and OEMs, while the channel sales caters to dealers and other retailers through our extensive branch network.

The company carries reputed third party brands such as Sintex, Uttam Galva, Uttam Value, Futura, APL Apollo and Alstone and own brands such as CenturyRoof, Ganga and Loha at the retail stores.

Its growth is further driven by its ability to make available an assortment of quality products under a trusted corporate brand built over two decades. The Company's staffs create awareness about products and applications, and guide customers' purchase decisions.


- Strong vendor network and relationship built over two decades.
- Presence across the entire value chain.
- Robust back-end infrastructure ensuring efficient supply chain management.

Objects of the issue

1. Repayment or pre-payment of loans of our Company (Rs. 34 Cr.)
2. General corporate purposes.


Company has ability to offer customers range of products according to the demand. The company also has a robust logistics network and a large part of its warehousing backbone is owned which ensures stability of operations.

Retail sales grew around CAGR 29 % in last 5 years, Profit margin of around 2%. Considering offer price of Rs. 460 and EPS of 18, P/E comes to around 25 which are considered reasonably priced. However return ratios are not very attractive as the ROE comes to about 12% and ROCE comes to about 9.9% on FY16 Basis.

The company is operating in a segment which is highly un-organized. The pie of unorganized to organized is huge and is likely to only grow. Few initiatives likes Housing for all will benefit this segment. Given this scenario we believe that this business is set to grow, however, business matrices are not very attractive. Though Pricing is fair, investors should take their own risk as we have a neutral view on the company.

Source: Equity Bulls

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