Latest Grey Market Premium Dt.
| Company Name | Offer Price (Rs.) | Premium (Rs.) | Kostak (Rs. 1 Lac.) |
| Gammon Infra | 167 | 4 to 5 | -- |
| Sita Shree Food Pro. | 30 | 3 to 5 | -- |
| Titagarh Wagons Ltd. | 540 to 610 | Discount | -- |
| Kiri Diys & Chemicals | 125 to 150 | 6 to 8 | -- |
Latest Grey Market Premium Dt.
| Company Name | Offer Price (Rs.) | Premium (Rs.) | Kostak (Rs. 1 Lac.) |
| Gammon Infra | 167 to 200 | 4 to 6 | -- |
| Sita Shree Food Pro. | 27 to 30 | 3 to 5 | -- |
| Titagarh Wagons Ltd. | 540 to 610 | 25 to 30 | -- |
| Kiri Diys & Chemicals | 125 to 150 | 10 to 13 | -- |
Kiri Dyes and Chemicals Ltd. is entering the capital market on 25th March 08, with a public issue of 37.50 lakh equity shares of Rs.10 each in the band of Rs.125 to Rs.150 per share.
The company is into manufacturing of Dyestuff with an installed capacity of 10,800 TPA, Dye-intermediates being Vinyl Sulphone of 3,600 TPA and H Acid of 3,600 TPA. For FY 07, the total income of the company was at Rs.140 crores with PAT of Rs.8.63 crore, resulting in an EPS of Rs.8.63 on equity of Rs.10 crores. For 6 months ending 30-09-07, topline was at Rs.105 crores, with PAT of Rs.8.90 crores.
The total borrowing of the company as at 30-09-07 was at Rs.58 crores, against the net worth of Rs.44.50 crores. Also, due to benefit under section 10B available till March 2010, the company is having MAT liability only, which is keeping its bottomline healthy. However, post March 10th, it will attract the usual 34% tax liability, which will reduce its bottomline to that extent.
Presently due to better realizations of Vinyl Sulphone and H Acid, the profitability of all such manufacturers are quite strong. However, this industry is quite cyclical and passes through a phase where it becomes difficult for the manufacturers to make profits. Working capital burden is also quite high for the industry.
Apart from this, the industry is commanding very low PE multiple of just 5 – 7 times. Atul Ltd., having turnover of Rs.1,000 crores and an EPS of close to Rs.10 is ruling at Rs.55, having a PE multiple of 5.50 times. This is despite book value per share of Rs.105 as at 31-12-07. Metrochem Industries with topline of Rs.300 crores and book value per share of Rs.80 is ruling at Rs.43, which is again despite an expected EPS of Rs.7 for FY 08, which translates into a PE of 6 times. Asahi Songwon having topline of close to Rs.80 crores and EPS of Rs.10 for FY 08, is ruling at Rs.30, translating into a PE of 3 times. This company issued shares at Rs.90 per share in May 07, which was at its lower band at that time. There are many companies like Bhageria Dye Chem, Shri Hari Chemicals ruling at a PE of close to 5 times.
In this scenario, the share price of this company is not worth beyond Rs.60, considering an EPS of Rs.12, on post issue equity of Rs.15 crores for FY 08 and multiplying it by 5 times. Hence, a clear advise to remain away from the issue even at the lower end of the price band.
Titagarh Wagons is entering the capital market on 24th March 08 with an issue of 23.84 lakh equity shares of Rs.10 each in the band of Rs.540 to Rs.610 per share. Of this, fresh issue is of 20.68 lakh shares while offer for sale is of 3.16 lakh shares, being made by the promoters of the company.
The company is engaged in the manufacturing of railways wagons, bailey bridges, heavy earth moving and mining equipments and steel and S G Iron castings of moderate to complex configuration with its two plants at Titagarh and Uttarpara, both in West Bengal. The company has been posting consistent financial performance year after year with FY 07 topline at Rs.284 crores with PAT of Rs.29.18 crores, resulting in an EPS of Rs.20. For six months ending 30-09-07, the total income of the company was at Rs.212 crores with PAT of Rs.24.30 crores. Generally, second half of the company is always better and hence FY 08 may see a topline of Rs.480 crores with PAT of Rs.58 crores, which may translate into an EPs of Rs.31.50 for the year. The present equity of the company of Rs.16.37 crores would rise to Rs.18.44 crores.
The wagon manufacturing division contributed about 80% to the income of FY 07 with Indian Railways being one of the largest customer of wagons. As at 31-01-08, of total wagon orders, 49.9% came from Railways. However, non-railway revenue was 68.25% of total income in FY 07. This is due to strong demand coming in from non-Indian Railway Customers for Wagons. Orders with the company as at 31-01-08 were of Rs.753 crores, of which wagon orders were for Rs.670 crores.
Presently there are 10 wagon manufacturers in India, of which, 4 are in public sector and 6 are in private sector. Indian Railways is planning to purchase 20,000 wagons in FY 09 against target of 11,000 wagon in FY 08, as per the recent railway budget. Wagon Investment Scheme introduced by the Railways from 1st April 2005, in place of Own Your Wagon Scheme also boosted the demand for wagons by the players using rakes for transportation of commodities on a regular basis.
Wheelsets are most critical component in wagon manufacturing, which are made in India by two manufacturers, both being PSUs. The company, therefore, to improve the wagon manufacturing capacity is setting up an axle machining and wheelset assembly facilities. The company would procure loose machined wheels and rough axles and shall undertake the machining, drilling, and tapping of the axles and hub machining of the wheels and shall press the wheels on to the axles to make them into wheelsets. This capacity is likely to be about 10,000 – 12,000 wheelsets per annum.
The comparable listed peer for the company is Texmaco Ltd., which is now ruling at Rs.1,300. Texmaco is likely to have a topline of Rs.700 crore, with PAT of Rs.55 crores, translating into an expected EPS of Rs.55 for FY 08, on an equity of Rs.10.44 crores. Book value per share of Texmaco is likely to be Rs.200 as at 31-03-08. This means share is presently ruling at a PE of 24 for Texmaco.
While comparing Titagarh with Texmaco, its book value post issue, would be close to Rs.200, if shares are issued at Rs.610 per share. The same would be at Rs.192, if shares are issued at Rs.540. Considering an expected EPS of Rs.31 for FY 08, share at the upper band is issued at a PE multiple of close to 20. Even post issue stake of promoters at 49% is close to 53% of Texmaco. FII stake of 38% in pre-issue instills confidence.
Considering the increase in purchase of wagons to 20,000 in the recent railway budget, the company would be having larger share and may continue to have 27% share of the enlarged orders of Indian Railways. Even procuring loose wheels and axles would improve its wagon capacity.
Share at lower band of Rs.540 is quite attractive and at the upper band of Rs.610 also, leaves room for gain, as FY 09 performance of the company would be quite good. The sector of the company enjoys very good discounting on the bourses and hence investment is recommended in the issue.
Latest Grey Market Premium Dt.
| Company Name | Offer Price (Rs.) | Premium (Rs.) | Kostak (Rs. 1 Lac.) |
| Gammon Infra | 167 to 200 | 5 to 7 | -- |
| Sita Shree Food Pro. | 27 to 30 | 6 to 10 | -- |
| Kiri Diys & Chemicals | 125 to 150 | -- | -- |
Latest Grey Market Premium Dt.
| Company Name | Offer Price (Rs.) | Premium (Rs.) | Kostak (Rs. 1 Lac.) |
| Rural Electrification | 105 | 12 to 14 | -- |
| V. Guard | 82 | 4 to 5 | -- |
| Gammon Infra | 167 to 200 | 16 to 18 | -- |
| Sita Shree Food Pro. | 27 to 30 | 2 to 4 | -- |
Sita Shree Food Products is entering the capital market on 11th March 08 with a public issue of Rs.31.50 crores in the band of Rs.27 to Rs.30 per share. At the lower end of Rs.27 per share, issue size would be of about 116.67 lakh shares.
The features of the issue are pathetic and negative on all the fronts, and do not seem attractive from any angle. For Fy07, the total income of the company was at Rs.82 crores with PAT of Rs.93 lakh on an equity of Rs.7 crores, resulting into an EPS of Rs.1.33, which implies a PE multiple of 20 times at the lower end of Rs.27. Post issue equity of close to Rs.23 crores would not be able to shown an respectable earnings, which would enable the company to declare any dividend.
The present business of the company of flour mill is not attractive at all; where a mill on can only make profits it’s holding the stock, having bought at the time of harvest. Now the company is setting up a solvent extraction plant, of 500 TPD, with an oil refinery of 100 TPD and a flour mill of 275 TPD. It reminds us today about the olden days of 94-95, when over 20 companies from Indore region used to come out with a public issue for setting up their solvent extraction plant. As of today none of them are surviving.
Probably, the same fate would befall this company Despite the shares being issued at a price of Rs.27 do not merit even a glance. However, as it is the trend today, the promoters may indulge in short term momentum, if the issue does not get any response. Clear advice to stay away!
Gammon Infrastructure Projects is entering the capital market on 10th March 2008, with a public issue of 165.50 lakh equity shares of Rs.10 each, in the price band of Rs.167 to Rs.200 per share. At the lower band, the issue size would be Rs.276 crore while at the upper band, it would be of Rs.331 crore.
We felt that the issuer would have, by now, learnt the lessons from the recent debacles in the primary market and would have accordingly priced their IPO at a more realistic level. But looks like the company has either missed the point of the lesson completely or has plainly, decided to ignore it completely.
One fails to understand the logic of valuing the company at an expected market capitalization of Rs.2,500 even at the lower price band of Rs.167 per share and at Rs.2,900 crore at the upper price band of Rs.200 per share. This is despite the fact that the books of the company show a debt of Rs.700 crore on completed projects and would be assuming a debt of Rs.1,886 crore for two road projects of 132 kms, one 66MW hydro power project and one bridge on river Kosi. Of these, a 100 kms road project has got just a 70% stake of the company.
The present business of the company comprises of two annuity road projects of 100 kms, one 700 meter bridge and multipurpose berths at Visakhapatanam port. In the earlier three projects, the stake of the company is about 94% to 98%, while in the port project it is about 42%.
The company is now going in for 10 more projects of which seven are in development phase and three are in pre-development phase. Of these 10 projects, financial closure has been made for four projects only. This implies that the balance sheet of the company, on consolidated basis, would keep ballooning with debt.
The net worth of the company as at 30/09.07 was at Rs.243.07 crore of which accrued profit is just Rs.18.20 crore while Rs.224.50 crore is from share capital and share premium. Of the present equity of Rs.128 crore, shares of Rs.112 crore have been issued to promoters at par while only 1.60 crore shares have been issued at Rs.75.88 to one private equity investor. Now the public issue is being made at Rs.167 (lower band) per share. But will the public get lured into it?
Maybe to attract the investors, only Rs.50 is being asked from the Retail and HNI investors on application. But we do not think that this strategy would work.
If we go by the comparative peers IRB Infrastructure, a company recently having gone public, have 512 kms of road, on toll basis in operation, including Mumbai Pune Expressway of 206 kms. Even this company has market capitalisation of just Rs.6,200 crore. Apart from this, IRB has 66% interest in a 1,400 acre realty project being developed near Pune. GVK Power, a player developing the Mumbai Airport, as also having interest in various road and power projects has a market capitalization of Rs.5,300 crore. Even the promoter of the company, Gammon India market capitalization is Rs.4,100 crore. So, on all the parameters, the valuation of the company looks quite stretched and over valued.
The expanded equity base of the company would be Rs.144.55 crore, which also looks quite high considering its level of activity. Even six months performance for the period from April 07’ to September 07’ is not good enough to attract investors. During this period, total income was at Rs.84 crore with PAT of Rs.10.95 crore. During FY07, total income was at Rs.109 crore with a PAT of Rs.29.85 crore.
There are many better stocks available in the secondary market with much better and diverse business model and also at attractive valuations. Hence it is not prudent and advised to go in for this issue, even at the lower price band of Rs.167.
Public Issues (IPO) Dt.:
Company | Open Date | Close Date | Issue | Offer Price | Rating | Recomm. |
Gammon Inrfa*** ( | 16.55 Lac (Rs. 331 Cr.) | 167 to 200 | -- | -- | ||
Sita Shree ( | 1.05 Cr. (Rs. 31.50 Cr.) | 27 to 30 | ���� -- | -- |
***Note: Gammon Infra Partly Paid :
For Retail & HNI Rs. 50 Per Share with application & Balance on allotment
Latest Grey Market Premium Dt.
| Company Name | Offer Price (Rs.) | Premium (Rs.) | Kostak (Rs. 1 Lac.) |
| Rural Electrification | 105 | 23 to 25 | -- |
| GSS | 400 | Discount | --- |
| V. Guard | 82 | 10 to 12 | -- |
| Gammon Infra | 167 to 200 | 25 to 30 | -- |
| Sita Shree Food Pro. | 27 to 30 | -- | -- |
Latest Grey Market Premium Dt.
| Company Name | Offer Price (Rs.) | Premium (Rs.) | Kostak (Rs. 1 Lac.) |
| Rural Electrification | 90 to 105 | 23 to 25 | -- |
| GSS | 400 to 440 | Discount | --- |
| Manjushree Extrusion | 45 | 5 to 7 | -- |
| V. Guard | 80 to 85 | 12 to 14 | -- |