Grey Market Premium Dt.
| Company Name | Offer Price (Rs.) | Premium (Rs.) |
| NU TEK India Ltd. | 192 | 6 to 7 |
| Austral Coke & Projects | 196 | 13 to 15 |
| Resurgere Mines & Minerals | 263 to 272 | 6 to 8 |
| Note: Dont subscribe for issue by just seeing premium Price as it may change anytime before listing. Subscribe only considering Fundamental of the companies | ||
Grey Market Premium Dt.
| Company Name | Offer Price (Rs.) | Premium (Rs.) |
| NU TEK India Ltd. | 192 | 3 to 5 |
| Austral Coke & Projects | 196 | 11 to 13 |
| Resurgere Mines & Minerals | 263 to 272 | 8 to 10 |
| Note: Dont subscribe for issue by just seeing premium Price as it may change anytime before listing. Subscribe only considering Fundamental of the companies | ||
Resurgere Mines & Minerals is entering the capital market from 11th August 08 to 13th August 08 with a public issue of 44.50 lakh equity shares of Rs.10 each, in the band of Rs.263 to Rs.272 per share.
The company is into extraction processing and sale of iron-ore and bauxite and has been in the business for the last three years. Till FY 05, the company was carrying out trading activities only and inspite of a turnover of Rs.75 crores, annually, never had a bottomline in excess of Rs.40 lakhs.
The company has taken three iron-ore mines on arrangement to raise iron-ore and subsequently purchase it. These mines are in Orissa and Jharkhand and lease period of two original holders were expired in 1989 and 1999. Even lease of third mine is expiring on 15-04-2009, though renewal applications for all three mines were made by the original lease holders in time, to the government.
Strangely, terms of the agreement of the company with the mine-lease holders have not been spelt-out or given. The company is now acquiring an iron-ore mines, in Sindhudurg, Maharashtra, for which application is under process at the Collector level.
Strangely, the proposed IPO is not to finance the acquisition or development of mines but to acquire processing plant and logistics for its existing activity. Rs.129 crores is earmarked for acquiring Drilling Machines, Pay-loaders, Crushers, for its 4 sites, while Rs.116 crores has been earmarked for purchase of 6 Railway racks.
The company intends to purchase 6 rakes of 61 wagons each, of which, orders for 3 rakes have been placed with Texmaco Ltd., for which, an advance of Rs.15 crore has been made. Under the scheme, on handing over purchased rakes, to the railways, the company would be provided with the assured supply of 4 rakes per month, against each rake and shall be given a freight rebate of 10%. The company shall also be entitled to get additional 2 rakes per month, against each rake, without freight rebate. However, the ownership of these rakes shall remain with the company for a period of 10 years and after that, the same shall be transferred in favour of Indian Railways.
Similarly, under its present contract of extraction and processing, the services of machineries, labour and material resources are outsourced which the company now intends to employ its own equipments.
So the present business model of the company is purely contractual in respect to raw-material mining and processing and dispatch, without having any ownership of fixed assets,. Due to this, the fixed assets of the company as at 31-03-08 are at Rs.2.11 crores on an annual turnover of Rs.425 crores. Total current assets of the company, as at 31-03-08, are at Rs.267 crores, which are largely financed by the networth of Rs.225 crores.
For FY 08, on total income of Rs.425 crores, PAT of the company was at Rs.66.56 crores which has resulted in an EPS of Rs.27.60. Present equity of the company would rise from Rs.24.09 crores to Rs.28.54 crores. This results, in a PE multiple of about 10 times, based on historic earning, and considering issue price at the upper band.
We need to compare the company with Sesa Goa which have its own iron-ore and coal mines and had a turnover of Rs.3,672 crores for FY 08, with PAT of Rs.1,492 crores, resulting in an EPS of Rs.379 on tiny equity base of Rs.39.36 crores. However, June 08 quarter of Sesa Goa has been much better, which had a topline of Rs.1,342 crores and PAT of Rs.633 crores, giving an EPS of Rs.160. This should result in an EPS of over Rs.500 for FY 09. Share price of this company is ruling at Rs.3,300 which implies in a PE multiple of 6.60 times., This is inspite of the fact that the company has proposed bonus issue in the ratio of 1 : 1 as also have gone for stock split from Rs.10 to Re.1, which are perceived as positive moves by the market.
Even otherwise, all other mining stocks are ruling at a PE multiple of less than 10. Prominent amongst them are Ashapura Minechem ruling at Rs.128, having an expected EPS of Rs.15 for FY 09, which results in a PE multiple of 8, GMDC ruling at Rs.256 is expected to have an EPS of Rs.20 for FY 09, which results in a PE of less than 13. Even various ferro alloys manufacturers like Navbharat Ventures, Facor Alloys, Ferro Alloys are ruling at a PE multiple of 5 – 8 times.
In this background, the issue of the company at a PE multiple of 10 is definitely expensive. However, if this is calculated on average earning of last three years, this multiple is at 18 times. Also, difference of atleast 20% between primary and secondary market pricing is always expected.
Also, the business model of the company does not have sound footing, as it is more of trading nature. Post mines acquisition, the things may improve, which will happen on a very low scale. Hence, the earning multiple of over 6 times, on historic earnings looks appropriate. Even track record of the promoters are not assuring at all.
All these warrant a cautious view on the issue, which is definitely expensive and hence advised to avoid.
Austral Coke & Projects is entering the capital market from 7th August, 2008 to 13th August, 2008 with a public issue of 72.60 lakh equity shares of Rs.10 each, in the price band of Rs.164 to Rs.196 per share. There is a green shoe option of upto 10.89 lakh equity shares.
The company is promoted by father – son duo who are also the promoters of Gremach Infrastructure Equipments & Projects Ltd., which went public on 8th March 07, and made an IPO of Rs.59 crores, by issuing shares of Rs.10 at Rs.86 per share. This company has shown speculative activity on the bourses with share price having touched a high of Rs.500 in the first week of January 08 and now languishing at Rs.90 with low of Rs.80 made in mid July 08. This is inspite of the fact that the company posted an EPS of Rs.24.50 for FY 08. This translates into a PE multiple of less than 4 and inspite of the fact that the company is into infrastructure equipment hiring business which has good discounting and huge growth potential. But due to concern on the promoter’s track record and issues of corporate governance, the share is rightly languishing at this level.
Mr. Ratanlal Tamakhuwala was one of the promoter of Gujarat NRE Coke, but due to family dispute, has disassociated himself in 1997, from the company.
The company is presently into manufacture of LAM Coke and refractory, trading of textile and providing rental of construction/earthmoving machineries. Though the company has its existing coke manufacturing plant in Kutch but nowhere in RHP, the company has bothered to state the installed capacity and its utilization. Even the financial performance for 11 months ending 28-02-08 are not very revealing as revenue break-up of Rs.226 crores into LAM Coke of Rs.124 crores, Textiles Rs.42 crores and Equipments of Rs.60 crores has not defined traded and manufactured. During this period, the company had traded turnover of Rs.102 crores. If we presume textile turnover of Rs.42 crores as traded one, its EBIT was just Rs.17 lakhs. Similarly, Equipment Division had turnover of Rs.60 crores, which also seems to be of trading had an EBIT of Rs.9.45 crores. So, increase in Gross Block during FY 08, of Rs.178 crores, represents increase in Coke unit capacity from 1,25,000 TPA to what level? During FY 06, the company increased its coke capacity form 50,000 TPA to 1,25,000 TPA as also created new unit of Refractory at an outlay of Rs.54 crore. So, why this additional spend of Rs.178 crores in FY 08?
The company has agreement with group companies for similar business of equipment hiring and purchase & sale of coke for management fee, which clearly conflicts with the interests of the company. So what is the necessity to have a separate company for both these business in this company?
The whole structuring of the company’s business has been made to enable the company to come out with an IPO. The bottomline of the company was at Rs.9.15 crores for FY 07 which rose to Rs.35.18 crores for 11 months ending 28-02-08. On present equity base of Rs.21.77 crores, even if we assume an EPS of Rs.19 for FY 08, share at the lower band of Rs.164 is issued at a PE multiple of over 9 times. Gujarat NRE Coke, an established player with presence in overseas market is ruling at a PE of close to 9 times, based on its FY 09 earnings. So, in this scenario, when the coke prices are softening having corrected from $ 200 per MT to $ 160 per MT in last one month, what is the rationale of this valuation, that too at the lower band. At the upper band of Rs.196, there are no justification or rationale at all.
The promoters have tasted the public money and by launching this IPO are planning to mobilize about Rs.150 crores, including green shoe option. Considering the track record of the promoters and of the company’s performance, it can only be presumed as a speculative issue solely for the benefits of the promoters.
A clear advice is to remain away, if you have fundamental view.
Grey Market Premium Dt.
| Company Name | Offer Price (Rs.) | Premium (Rs.) |
| Vishal Information Technologies | 140 to 150 | 3 to 5 |
| NU TEK India Ltd. | 170 to 192 | 6 to 8 |
| Austral Coke & Projects | 164 to 196 | 20 to 22 |
| Note: Dont subscribe for issue by just seeing premium Price as it may change anytime before listing. | ||