Grey Market Premium Dt. 24-9-2009

IPO News Dt.: 24-9-2009

Company Name	Open Date	Close Date	Issue Size	Offer Price	Rating	Recomm.
Thinksoft Global Services Ltd. (Book Building)	22-9-08	24-9-08	36,46,000 Shares (Rs. 47 Cr.)	120 to 130	40 %	Aggressive
Euro Multi Vision (Book Building)	22-9-08	24-9-08	88,00,000 Shares (Rs. 66 Cr.)	70 to 75	41 %	Average

Latest Grey Market Premium Dt. 24-9-2009

Company Name	Offer Price (Rs.)	Premium (Rs.)	Kostak (Rs. 1 Lac Application)	Subject to Sauda
Oil India	1050	32 to 33	--	--
Pipavav Shipyard	58	2 to 3	--	--
Thinksoft Global	120 to 130	4 to 2	1600 to 1675	--
Euro Multi Vision	70 to 75	4 to 5	1500 to 1550	--

Euro Multivision: Gives Blurred Vision

Euro Multivision is entering the capital market from 22nd September 09 to 24th September 09, with a public issue of 88 lakh equity shares, of Rs. 10 each, in the band of Rs. 70 to Rs. 75 per share.

It is very much essential for us to first understand and take call on the public issue made by its group company Euro Ceramics, which went public on 07-02-07, with a public issue of 56,21,500 shares of Rs. 10 each, in the band of Rs. 150 to Rs.180 per share, and share having allotted at Rs. 180. This stock is now ruling at Rs. 48 with its 52 week high / low of Rs. 64 and Rs. 22. Apart from this, its disclosure in the RHP, of proposed IPO is pathetic, misleading, suppressing and confusing. On page 150, it has neither given number of shares issued nor the rate at which they were made. Even financial performance is wrong and contrary. On page (xviii) loss for year ending 31st March 2008 were shown as Rs. 22.82 crores, but infact, it is for 31st March 09, and that too, on standalone basis. Also, it does not say whether it is net loss or at what stage? Even page 150, states the financial performance for FY09, on standalone basis and not on consolidated basis. Net loss on standalone for FY09 is shown at Rs. 22.82 crores, while it is at Rs. 30.16 crores, on consolidated basis. This increases net loss per share to Rs. 17.64 and not at Rs. 13.34, as stated. Can you really trust such promoters with such disclosure norms and corporate governance as also, erosion of wealth, by 74% in last 30 months, on principal basis.

Now coming to this company, it is setting up a 40 MW per year Photovoltaic Solar Cell manufacturing unit at Kutch with a project cost of Rs. 178.03 crores. Strangely, project cost of the same is stated at Rs. 167.56 crores on page 69 of RHP. This is proposed to get financed with term loan of Rs. 100 crores and proposed IPO proceeds of Rs. 66 crores (considering upper band of Rs. 75 per share). Shortfall of Rs. 12 crores, is proposed to get sourced from internal accruals. As at 31-03-09, total debt of the company is at Rs. 192 crores on net worth of Rs. 31 crores resulting in a debt equity ratio of over 6:1. So, existing reserves and surplus of Rs. 16.47 crores, being referred as internal accruals, is already utilized for the existing operations of the company. So how the same can get allocated to the new project?

Existing financial performance of the company is also pathetic to say least, with FY09 topline at Rs. 74 crores with PAT at Rs. 1.84 crores, resulting in an EPS of Re. 1.22. Also, Solar Cell business is high technology and high capital intensive, where, even established and large players are finding it difficult to succeed. Even Reliance Industries have been talking to foray in this but not yet done any headway and Moser Baer is struggling to succeed.

For such incorrect and inadequate disclosures, SEBI should initiate strict action as the interests of public money is involved. Considering all these, issue does not deserve any merit and attention and should be avoided under any and all the circumstances.

Thinksoft Global Services: Think away

Thinksoft Global Services is entering the capital market from 22nd September 09 to 01st October 09, with an IPO of 36.46 lakh equity shares of Rs. 10 each, in the band of Rs. 120 to Rs. 130 per share. Of this, fresh issue is of 13.50 lakh equity shares while Offer for Sale is of 22.96 lakh equity shares. Hence, at the upper band of Rs. 130, IPO size will be of Rs. 47.40 crores, of which Rs. 17.55 crores will come to the company and Rs. 29.85 crores will go to the selling shareholders.

The company is a BFSI software testing enterprise having its offshore facilities at Chennai with 360 seats. It is now planning to add another 400 seats with a total outlay of about Rs. 17.50 crores, including IPO expenses. The company had a cash balance of Rs. 14.72 crores as at 31-03-08 and Rs. 26.56 crores as at 31-03-09. So, why these plans were not carried out and implemented by the company with its own funds and what is the need of this IPO? Is it an exit route now being given to the selling shareholders?

The company is a very small player with its total income at Rs. 95.66 crores with PAT at Rs. 14.50 crores resulting in an EPS of Rs. 16.65. This implies a PE multiple of 7.80 times at the upper band and at 7.20 times at the lower band. Presently, many quality mid cap IT stocks are available in a P.E. multiple of 6 to 8 times, while this will be a small cap company which would rule at much lower PE. These types of companies have not been able to reward shareholders and would languish after seeing an initial fireworks, post listing.

Financials of the company are also not comforting. Of the cash and bank balances of Rs. 26.56 crores, held by the company, as at 31-03-09, is placed to the extent of Rs. 21.59 crores in current accounts in foreign currency. F.D. with the banks has decreased to Rs. 1.61 crores as at 31-03-09 from Rs. 4.50 crores as at 31-03-08. Even current liabilities of Rs. 17.10 crores is not comforting, of which, Rs. 10.90 crores is toward provisions for expenses. Sundry Debtors of Rs. 23.86 crores, as at 31-03-09 is quite high, considering its total income of Rs. 92 crores for FY 09. Even having a cash credit limit sanction of Rs. 2.50 crores (though not availed and utilized) raises doubt for this cash rich company, having a cash balance of atleast Rs. 5 crores in all these years.

Considering all these, issue does not merit any attention and should be given a ski

Grey Market Premium Dt. 4-9-2009

Latest Grey Market Premium Dt. 4-9-2009

Company Name	Offer Price (Rs.)	Premium (Rs.)	Kostak (Rs. 1 Lac Application)	Subject to Sauda
Jindal Cotex	70 to 75	4 to 4.50	--
Globus Spirits Ltd.	90 to 100	6 to 8	--	--
Oil India	950 to 1050	90 to 95	1800 to 2000 (+ 250 Form Commission)	--

OIL India: This Oil is expensive

Oil India is entering the Capital market on 7^th September 09 with a public issue of 2.65 crore equity shares of Rs. 10 each, in the band of Rs. 950 to Rs.1,050 per share.

The company can very well be compared with ONGC, as, it is about 10% of ONGC, in terms of level of operations and activity, while, almost at par on financial parameters. Let us have a look to the financials of both the companies as at 31-03-09: -

Rupees / Crores

	ONGC	Oil India
Sales	1,05,257	8,138
PAT	19,795	2,162
EPS (Rs.)	93	101
Book Value (Rs.)	428	436
Equity	2,139	214
Net Worth	91,573	9,331
Dividend (Rs.)	32.00	30.50
Subsidy Share	28,225	3,023
Debt Equity	Debt Free	Debt Free

So, if someone is deciding to buy share of Oil India, infact, it is mini ONGC being bought. Post IPO, equity will rise to Rs. 240 crores, with Government of India stake falling at 78.50% against 74%in ONGC. So even on this count, it remains, almost at the same levels.

It is an accepted fact of the market, while valuing companies in the same sector, with same pedigree, smaller companies have atleast 15% discount to the bigger ones. Also, in the case of IPO, atleast 10% discount needs to be given, over the expected listing price, to prospective investors.

Since ONGC is now ruling at Rs. 1,185, a discount of 15% over this, gives a secondary market valuation of Rs. 1,000 per share. A further discount of 10% on this, justifies a price of Rs. 900 per share in IPO. Since the band of the share has been fixed at Rs. 950 to Rs. 1,050 per share, even accepting lower band of Rs. 950, based on these presumptions, would be difficult to accept.

NHPC, another PSU IPO, has also recently disappointed giving not much profit to retail investors and losses to HNIs. At that time also, we have said that the government has become greedy by having stiff pricing and the same trend looks to continue for this IPO as well. NHPC having issued shares at 36 is now ruling at 37. It may be worst for Oil India.

Really speaking, though we are not convinced even at the lower band of Rs. 950 per share, but those who are to keen to go for it, should contemplate applying at the lower band. It is infact worth and advisable to buy ONGC from the secondary market, instead of going in for this IPO. To justify the pricing of this IPO, share price of ONGC has to move up from its present level of Rs. 1,185. So why not bank on the leader and giant instead of this tiny and regional player.

Jindal Cotex: Say No Thanks

Jindal Cotex is entering the capital markets on 27th August 09, with a public issue of 1.25 crore equity shares of Rs. 10 each, in the band of Rs. 70 to Rs. 75 per share. Promoters are subscribing to 12.04 lakh shares, while 107.50 lakh shares are offered to the public.

One must admire the courage of the promoters to come out with an IPO in the band of Rs. 70 to Rs. 75, against the book value per share of Rs. 23.10, as on 30-06-09 and at a PE multiple of 21.68 times, at the upper end of the price band. There are over 10 similar companies available at PBV of 0.50 times and at a PE of close to 5 times. For example, SEL manufacturing having book value of Rs. 184 is ruling at Rs. 70. This is inspite of the company having posted an EPS of Rs. 33.50 for FY09 and Rs. 12 in quarter ending June 09. SEL also has sizeable presence having 4 garmenting units and 1 spinning and knitting units with annual sale of Rs. 605 crores for FY09. SEL has 74,256 spindles for cotton yarn, 7,050 TPA of knitted fabrics, 3,000 TPA of fabrics processing and dyeing and 7.50 million pieces per annum of garments. That means, this company is available at a PBV of 0.38 times and PE multiple of 2 times. There are over 10 such companies available in this range of valuations.

Books of the company are quite leveraged with debt of close to Rs. 55 crores, on net worth of Rs. 29 crores, as at 30-06-09. The proposed project cost of Rs. 216 crores is financed by term loan of Rs. 91 crores and proposed IPO of Rs. 90 crores, thus leaving a gap of Rs. 36 crores, in addition to public issue expenses.

Such companies come out with IPO mainly to play in the stock market, as it is obvious that no sane investor would be willing to subscribe to it, when so many lucrative ideas are available in the secondary market. So the issue is for, of and by the promoters, ab-initio. Maybe, effort shall be made by them to offload this IPO in the secondary market, by indulging into market manipulations and operations. This kind of movement, we have been witnessing in the share price of about 8 -10 companies. Promoters of this company seem to have inspired by those companies.

A clear advice to the public – remain away from the issue and don’t be part of this weak and unviable project.