Avoid Investment in Bang Overseas Limited

Bang Overseas Limited (BOL) is engaged in the manufacturing of fashion fabrics and meeting ready to wear requirements of its customers in the apparel, textile, and retail segment. The Company proposes to utilize the issue proceeds to augment its apparel manufacturing capacity and strengthen the distribution network. Post expansion, the manufacturing capacity will increase to 19.8 mn pieces p.a. and the number of retail outlets to 100.

BOL had negative cash flows in the past, owing to a high average debtors cycle and an unreasonable average inventory days.Small size of operations, a relatively new brand “Thomas Scott”, and the absence of any competitive leverage do not augur well for the Company. BOL has neither entered into any definitive agreement or tie-ups for its expansion plans nor has made any provisions for increased working capital requirements.

Bang Overseas Limited is valued at a P/E of 17.5x and 18.1x at the lower band of Rs. 200 and the upper band of Rs. 207, respectively. You can look for opportunities in the secondary market as valuations are attractive for front-line stocks. Avoid investments in Bang Overseas Limited Public Issue.