!!!!!!!ISSUES!!!!!!!!!!!

vengabeats

Par 100 posts (V.I.P)
Inox Leisure Ltd. Issue open on 27th Jan.

Issue Open 27/01/2006
Issue Close 02/02/2006
Issue Size 16500000
Issue Type Book Building
Face Value Rs.10/-
Price Range Rs.100/- to Rs.120/-
Tick Size Re.1/-
Market Lot 50
Minimum Order Qty 50
Listing Stock Exchange NSE, Mumbai


Inox Leisure is one of India's larger multiplex cinema operators. It has eight operational multiplexes, with 32 screens across seven cities: Mumbai, Pune, Vadodara, Goa, Jaipur, Kolkata (two multiplexes) and Bangalore.

While consolidating its position in the exhibition business, Inox Leisure has entered the film distribution business, acquiring the distribution rights for certain Hindi film titles in select distribution circuits. It had invested Rs 7.5 crore in financing the film, "The Rising'.

Inox Leisure's present IPO is to raise finance its expansion. The company is setting up around 11 multiplexes in locations like Hyderabad, Vishakapatnam, Jaipur, Kolkata, and Bangalore at an estimated cost of Rs112.82 crore.

Strengths

Inox Leisure has developed a strong patronage in the last couple of years. Over 2003-05, the number of patrons has shown a robust CAGR of 52% to 38,88,547 and in the half-year ended September 2005, it touched 80% of the numbers in FY 2005, at 31,25,801.
The revenue has shown a impressive CAGR of 57% to Rs 61.48 crore over 2003-2005 and touched Rs 50.25 crore in the six months ended September 2005, which was 80% of the full year sales of FY 2005. OPM has grown steadily to 33.6% end FY 2005, from 28.7% in FY 2003. In six months ended September 2005, it stood even better at 40.3%. The bottom line grew from mere Rs 9 lakh in FY 2003 to Rs 8.24 crore in FY 2005. In the six months ended September 2005, the profit after tax was Rs 9.73 crore.
The Indian multiplex industry is on a high growth trajectory, with its increasing share of the overall box office collections. The growth of multiplexes is fuelled by a rise in disposable incomes, a boom in organised retail, entertainment tax benefits given by several state governments and the corporatisation of the Indian film industry.
Weaknesses

The promoter of the Inox Leisure, Gujarat Fluorochemicals (GFL), is not related to the film industry and is reducing its stake through offer for sale in the present IPO. About 10% of the total funds raised will go to GFL, and not to the company.
Over 75% of the revenue comes from box-office collections. The poor success rate of Hindi films, inadequate enforcement of anti-piracy laws in India and increasing home viewing options such as DVD and cable TV may constrain the growth in the number of cinema patrons.
The multiplex business enjoys relatively low breakeven due to higher ticket rates and entertainment tax benefits. However, tax benefits are for a limited period and ticket rates can be regulated by the states.

Valuation

The nearest comparable companies are PVR Cinema, Adlabs and Shringar Cinemas. PVR Cinemas, which is the largest multiplex cinema operator by number of screens, recently completed its IPO and is trading around 169 times its FY 2005 EPS, Adlabs is trading at a PE of around 60 times its FY 2005 EPS. Shringar Cinemas, which has yet to report profit, is trading around Rs 80.

On an expanded equity of Rs 60 crore, FY 2005 EPS of Inox Leisure works out to Rs 1.26. Based on this, PE stands at 79.4 and 95.2 at the price band of Rs 100 and Rs 120. In the first half, the company has already crossed the FY 2005 net profit. However, first half is the main season and one cannot annualise the figures. Nevertheless, one can expect over 100% growth in net profit in FY 2006, bringing down the PE to below 50.
 

vengabeats

Par 100 posts (V.I.P)
Sadbhav Engineering Ltd. Issue Open on 3rd Feb.

Issue Open 03/02/2006
Issue Close 08/02/2006
Issue Size 2900000
Issue Type Book Building
Face Value Rs.10/-
Price Range Rs.165/- to Rs.185/-
Tick Size Re.1/-
Market Lot 35
Minimum Order Qty 35

Analysis

Background :

Sadbhav Engineering Limited (SEL) was incorporated in 1988 as a private company. It took over the running business of M/s. Bhavna Construction Co. in 1989. M/s. Bhavna Construction Co. was a partnership firm, engaged in construction business since 1968.
SEL's main focus areas are irrigation, roads & highways and mining operations. In a span of 17 years, SEL has executed a total of 32 projects. The company has executed various canal and road projects from Sardar Sarovar Narmada Nigam Ltd. and NHAI. It has also carried out excavation of overburden and lignite for GIPCL, GMDC, GHCL, etc.
SEL has its own workshop at Ognaj, Ahmedabad where its equipments are maintained and overhauled regularly. Sadbhav has also obtained ISO 9001-2000 certification for management systems in the year 2005.
As on March 31, 2005 the company's contract receipts stood at Rs.205.37 crore and for the six months ended September 30, 2005 stood at Rs.125.26 crore.
The company has envisaged a total cost of Rs.55.46 crore for the new project. The entire requirement of the fund is proposed to be financed through this Issue.

Objects of the Issue :

To meet the investment requirements in Mumbai - Nasik Expressway Limited; a Special Purpose Vehicle incorporated for the execution of the Vadape-Gonde four lane BOT (Build Operate Transfer) project.
To meet margin money for purchase of capital equipment.
To meet working capital requirement & issue expenses.

The following project will be executed :

SEL will be undertaking the Vadape Gonde four lane BOT project that will be its first BOT project. The project has been awarded by NHAI and shall be executed by Mumbai Nasik Expressway Limited, a Special Purpose Vehicle formed by Gammon India Limited, B.E. Billimoria & Co. Limited and SEL. The total equity component is expected to be Rs.175 crore. Out of this, the company will be contributing 20% of the share capital. Sadbhav will be executing construction work worth Rs.486 crore.

Strengths :

Experienced promoters are managing the company. Mr. Vishnubhai M Patel, the CEO and Managing Director, has more than 37 years of experience in the construction industry.
SEL has track record of completing all the projects in the stipulated time schedule without compromising on the quality of work. The company's adherence to the standards and procedures prescribed by NHAI and other funding bodies has helped it to bag many prestigious projects. Sadbhav has a bid capacity of Rs.702.45 crore for NHAI projects.
Sadbhav gets 75% of its revenues from road projects. SEL has over nine years of experience in road projects and has developed expertise in handling large projects independently and through joint ventures. The government plans to invest substantially in road development as it has been identified as a key sector. This will be positive for the company.
The Indian construction industry is valued at Rs.2,40,000 crore and is growing at 7% to 8% per annum. India has been ranked as the sixth-fastest growing country in terms of construction. The Government is concentrating on infrastructure development of the country and is therefore giving great impetus to major projects in the road, irrigation and mining sectors. This will be beneficial for the company in the long term.

Weakness :

The Vadape-Gonde four-lane BOT project, which would be funded by the present IPO is a toll based project. The success of the project would depend upon the traffic and toll collections. Toll based projects have not been successful in India.
The BOT project will not yield immediate returns to Mumbai - Nasik Expressway Limited, the SPV and in turn the company. The toll revenue flow will commence from the beginning of fourth year i.e. on completion of the construction period as per the tender document.
The company's contingent liabilities as on 30th September 2005 stand at Rs.203.34 crore. As against this, the net worth of SEL is Rs.65.88 crore. In case these legal obligation/contingent liabilities materialize, the net worth of the company will be negatively affected.
SEL has an outstanding amount of Rs.17.46 crore as debtors exceeding more than six months as on 30th September 05. Out of this Rs.14.46 crore is outstanding from Gujarat Industries Power Company, for which SEL has filed suit. Sadbhav has not made any provisions for the same. In case of non-recovery, the profitability will get affected.

Valuations :

The total revenues and net profits of the company have increased at a CAGR of 2.4% and 1.4% respectively over the period FY 2000-05.
For the financial year ending 2005, the company's total income has declined by 16% to Rs.207.28 crore from Rs.247.31 crore in the previous year. This was because of decrease in turnover from road projects as no tenders for road construction were floated by NHAI. During the year 2004-05, the construction expenses reduced by 13.7% to Rs.112.18 crore due to reduction in turnover and cost saving measures of the management.
In contrast to this, the net profits of the company increased by 44% to Rs.7.38 crore in FY 05 from Rs.5.13 crore in the previous year. This was because of the deferred tax benefit that was credited.
For the half-year ended September 2005, the total income and the net profits stood at Rs.123.82 crore and Rs.5.69 crore respectively. The net asset value per share as on 30th September 2005 was at Rs.82.36.
Annualized EPS on post-IPO equity works out to Rs.10.45. At the price band in the range of Rs.165 to Rs.185, the shares are being offered at a post issue annualized P/E of 16-18 times. In comparison to this, the average PE multiple for industry stands at 27x.
 

ViJiT

Vijith Pujari
Re: Sadbhav Engineering Ltd. Issue Open on 3rd Feb.

Well venga make a particular thread on ISSUE and make it sticky so that all issue are posted in a single thread itself....and would be much easily for ppl to access.
 

vengabeats

Par 100 posts (V.I.P)
GVK Power & Infrastructure Ltd. Issue Open on 2 Feb

Issue Open 02/02/2006
Issue Close 07/02/2006
Issue Size 8275556
Issue Type Book Building
Face Value Rs.10/-
Price Range Rs.260/- to Rs.310/-
Tick Size Re.1/-
Market Lot 20
Minimum Order Qty 20
Listing Stock Exchange NSE, Mumbai

GVK Power & Infrastructure (GVKPIL) is the holding company of the
power businesses of GVK and also provides operations and maintenance
services to its power assets. G V Krishna Reddy controlled GVK is a
diversified business group with interests in power, roads, urban
infrastructure, bioscience, hotels and manufacturing. The group has
identified power and infrastructure as focus areas.

GVKPIL presently owns a 53.96% stake in GVK Industries (GIL), which
has two power plants: (i) the operational 216-MW Jegurupadu Phase I,
and (ii) the 220-MW Jegurupadu Phase II project, to be commissioned by
mid February 2006.

In addition, GVKPIL currently owns a 47.47% equity stake in Gautami
Power (GPL), which is developing a 464-MW combined cycle power plant
that is expected to be commissioned by September 2006. GVKPIL will
increase its ownership in GPL to 51% by subscribing to the equity of
GPL. Once all the three plants become operational, the total capacity
of the three plants will be 900 MW. All the three plants are
independent power plants (IPP) and supply, or will supply, their
output to Andhra Pradesh power distribution companies (APDISCOMs)
under their respective long-term power purchase agreements

GVKPIL proposes to utilise the funds raised through this issue to
contribute part of the equity required by GPL to establish a 464-MW
duel fuel combined cycle plant located in Andhra Pradesh and repay the
bridge finance availed for funding the equity of GPL. The equity
investment in GPL is estimated at Rs. 95.3 crore and the repayment of
loan is estimated at Rs 60 crore.

The initial public offer (IPO) is of 8,275,556 equity shares of Rs 10
each through 100% book-building process. The price band has been fixed
at Rs 260 to Rs 310 per equity share of Rs 10 each. The issue opens on
2 February and closes on 7 February 2006. It will constitute 35% of
the fully diluted post-issue paid-up capital of the GVKPIL.

Strengths

Each of GVKPIL's generation facilities has an assured source of
revenue under a take- or- pay power purchase agreement(PPA) with
APDISCOMs. The power distribution companies are required to pay for
the plant's output at an agreed plant load factor (PLF), regardless of
whether or not APDISCOMs actually takes delivery of the power
generated. APDISCOMs' payment obligations to GVKPIL, as per PPAs, are
secured by letters of credit, escrow arrangement and the state
government's guarantee covering all of APDISCOMs' payment obligations.
According to GVKPIL's management APDISCOMs has never defaulted on
their monthly payment obligations even by a signal day.
It is expected that GVKPIL will benefit from economies of scale
through the use of shared facilities between Jegurupadu Phase I and
Jegurupadu Phase II. These shared facilities include using the
approach roads to the projects, sharing the use of the demineralised
plant capacity, raw water storage reservoir and potable water, staff
quarters, and the administrative building and the compound walls.

Weaknesses

Currently there is shortage in the availability of gas in Andhra
Pradesh. The shortage is likely to persist at least in FY 2007. As a
result, operations of the existing Jegurupadu phase I as well as
proposed phase II and GPL will be adversely affected.

Valuation

The FY 2005 EPS of GVKPIL (standalone) stands at Rs 0.7 on post-issue
equity. The company's net profit in the first half of FY 2006 has been
inflated by Rs 2 crore by the one-time technical services fees
received from subsidiary and interim dividend of Rs 5 crore received
form the subsidiary. Thus, the net profit of Rs 4.23 crore in the
first half of FY 2006 cannot be annualised. Here it will be more
appropriate to consider the consolidated results, which shows a net
profit of only Rs 48 lakh. On annualising it, the consolidated EPS is
just Rs 0.4. Th offer price band is Rs 260-310. Naturally, the price
band factors in the company's expected full earnings from the two
proposed new power projects. However, considering the state of natural
gas availability, these projects are likely to fully reflect earning
only from FY 2008.
 

vengabeats

Par 100 posts (V.I.P)
Sakuma Exports Ltd.Issue Open on 8th Feb

Issue Open 08/02/2006
Issue Close 14/02/2006
Issue Size 6666667
Issue Type Fixed Price
Face Value Rs.10/-
Price Range Rs.50/-
Tick Size
Market Lot 100
Minimum Order Qty 100
Listing Stock Exchange Mumbai, NSE

Analysis

Background :

Sakuma Exports Ltd. (SEL) started its operation as a partnership firm in the year 1999. The firm was converted to a public limited company in the year 2005.
The company is into trading and export of commodities and merchandise both in domestic and international market. Presently it has a client base of over 75 in South East Asia, Middle East, Europe, Africa and the United States of America. Clientele of the Company includes Mitsubishi Corporation, ConAgra (International) S.A, Khimji Ramdas.
The company exports commodities like peanuts, red split lentils, De-oiled cakes (soya, sunflower etc.) sugar, onions, maize, wheat flour, sesame seed, chilli, rice, castor oil and chickpeas.
SEL has supply chain with more than 400 suppliers across India. It is exporting from a number of seaports along the coastline of India - Mundra, Kandla, JNPT, Nhava Shiva, Mumbai, Chennai, Kakinada and Vizag, apart from the dry ports.
Object of the Issue :
Increase in Long Term Working Capital: Rs. 3650 lakhs.
General Corporate Purposes: Rs. 333 lakhs.
Issue Expenses: Rs. 350 lakhs.

Strengths :

SEL has been making profit for last five years. In the year 2002, the company was conferred certificate of recognition as an 'Export House'.
The net profit of the company has grown from Rs.17.86 Lakhs in March 2003 to Rs. 135.85 Lakhs in March 2005 at a CAGR of 175.8 %. The sales of the Company have grown from Rs. 3,874 Lakhs as on March 2003 to Rs. 16,021 Lakhs as on March 2005 at a CAGR of 103.3%.
In FY 2004-05 export in agriculture and allied product recorded a growth of 9.12% with the export value touching Rs.27,111 crore. Major export items that registered a positive growth are pulses, castor oil, nuts and seeds and cereals.
Role of International trade is on the rise, thanks to globalization of markets. In FY2004-05, export touched US$ 80 billion, which is below 1% of the global export market. In view of the Trade deficit and negative balance of payment of India the Government has been laying thrust on Export Promotion. Exporting companies are likely to get benefit out of this.

Weakness :

SEL depends a lot on few customers. Top 10 customers of the company constitute nearly 70% of the total export turnover in FY2005.
Sundry Debtors at the end of FY2005 stood at Rs.4,757 Lakhs, which is 88% of the Total assets. This resulted in a negative cash flow.
Net profit margin of the company has decreased from 1.3% in FY2002 to 0.85% in FY2005. Even though export opportunities in several agricultural commodities like sugar and horticulture are opening up, trading in them is subject to the vagaries of international price. This could adversely affect the bottom-line.
The company is unable to execute bulk orders due to shortage of fund. It is also unable to forward business credit.
SEL operates in a globally competitive environment. Growing competition might force the company to reduce the price of its commodities, where the margin is already wafer-thin.

Valuations :

Sales has increased by 75 % from Rs.9,188 lakhs in FY2004 to Rs.16,021 lakhs in FY2005. PAT during the same period has increased by 56% from Rs.18 lakhs to Rs.28 lakhs.
Return on Net worth has increased from 12.48% in FY2004 to 27.68% in FY2005. NAV per share at the end of FY2005 Rs.10.
Post issue EPS works out to be Rs.2.47 based on annualized profit till 31st August 2005, Rs.399.79 lakhs. Shares are offered at a price of Rs.50, at a PE multiple of 20.23. Peer group companies like Adani Exports and Vishal Exports Overseas have a PE multiple of 12.22 and 3.26 (calculated on NSE price of 7th Feb, 2006).
 

ViJiT

Vijith Pujari
The South Indian Bank Ltd.Issue Open on 10th Feb.

Issue Open 10/02/2006
Issue Close 15/02/2006
Issue Size To be announced
Issue Type Book Building
Face Value Rs.10/-
Price Range Rs. 60/- to Rs. 66/-
Tick Size Re.1/-
Market Lot 100
Minimum Order Qty 100
Listing Stock Exchange Mumbai, NSE, Cochin

Analysis

Background :

The South Indian bank (SIB) is one of the old generation private banks; it was incorporated in 1929 and became a scheduled bank in the year 1946.
SIB is into retail as well as corporate banking space. Bank's retail portfolio includes housing loans, gold loans, auto loans, educational loans and other personal loans, while for corporate clients it offers products like term loans, short term loans, cash credit, working capital finance, export credit, bill discounting, letters of credit and guarantees.
Bank also offers specialized products for agriculture sector like SIB planters' choice (Loan for land purchase to agriculturist) and SIB agriflex (Loan for land development). SIB is a depositary participant for CDSL. As on September 30, 2005 it has over 2,734 active depository accounts spread over 46 centres across India.
SIB's business is spread across 17 states and 2 union territories through its 432 branches and 59 extension counters as on September 2005. This network includes 92 rural, 195 semi-urban, 81 urban, and 64 metropolitan branches with 19 specialized branches of which 13 are NRI branches. As on September 30, 2005, 276 of Sib's branches and 21 Extension Counters are online networked under CBS and this covers over 87% of Bank's total business.
The bank has tie up with ICICI Asset Management Company for the distribution of mutual funds. It also sell life insurance products of ICICI Prudential and non life insurance products of United India Insurance.
It is the first private sector bank in India to open a Currency Chest on behalf of the RBI in April 1992 and to start an Industrial Finance Branch in March 1993.
SIB is the first Kerala based Bank to implement a Centralized Banking solution. It is the first private sector bank in Kerala to open an overseas branch to cater exclusively to export and import business.

Object of the issue :

To augment capital base so as to meet the future capital requirements arising out of the implementation of the Basel II standards.
To meet issue related expenses.
Strengths :
Average cost of deposit of the bank was decreased from 8.48% in FY02 to 5.42% in FY05. While for its competitors like Centurion bank of Punjab, Federal bank and Karnataka bank ratio was at 6.17%, 5.92% and 7.03% respectively in FY05.
Bank's credit deposit ratio as on 31st March 2005 stood at 63.18%, while for its competitors like bank of Rajasthan, Centurion bank of Punjab and Karnataka bank ratio was at 35.67%, 62.15% and 58.02% respectivey.

Weakness :

Capital adequacy ratio of the bank as on 31st March 2005 was at 9.89%, which was just above the regulatory requirement of 9%. While for its competitors like Bank of Rajasthan, Centurion bank of Punjab and Karnataka bank ratio was at 12.75%, 39.22% and 14.16%. (Source RBI)
Net NPAs to Net Advances ratio of SIB stood at 3.81% as at March 31, 2005. While for its competitors like Bank of Rajasthan, Centurion bank of Punjab and Karnataka bank ratio was at 2.5%, 2.51% and 2.29%.
As of September 30, 2005, 27.67% of bank's net demand & time deposit and 90.86% of total investments were in Government and other approved securities. Yields on these investments are dependent to a large extent on interest rates. In a rising interest scenario market value of these securities could decline.
Most of the business is coming from single state Kerala. As on 31 st March 2005, 432 branches, or approximately 81% of bank's total branches were located in the state of Kerala, approximately 83% of the Bank's loans and advances were from branches located in the state of Kerala. So, the loan portfolios are regionally concentrated.
Rising oil prices, liquidity mop-up due to accelerated corporate Capex and current unreasonably low level of real interest rates are expected to put upward pressure on the interest rates. Rising interest rates coupled with funding constraint posed by lower deposit growth could act as dampeners to credit growth and could also exert pressure on margins of banking industry. These could affect SIB's performance in future.

Valuation :

Total income of the bank increased at a CAGR of 7.26% to Rs. 811 crores in FY05 from Rs. 613 crores in FY01. However the net profit of the company went down to Rs. 15.55 crores in FY05 from Rs. 86.66 crores in FY04 due to decrease in the profit on sale of investment from Rs. 187 crores in FY04 to Rs. 37 crores in FY05.
Net worth of the Bank as on September 30, 2005 was Rs. 450 crores. While the book value per Equity Share as on September 30, 2005, was Rs. 77.87. However the return on net worth as on September 30, 2005 was 3.78%.
Post issue annualized EPS of the bank based on 30th September 2005 earnings work out to be Rs.3.84 on lower band; at a PE multiple of 15.63. Similarly Post issue annualized EPS work out to be Rs. 3.95 on upper band; at a PE multiple of 16.71.
 

vengabeats

Par 100 posts (V.I.P)
Indo Tech Transformers Ltd.Issue Open on 10th Feb.

Issue Open 10/02/2006
Issue Close 16/02/2006
Issue Size 3945130
Issue Type Fixed Price
Face Value Rs.10/-
Price Range Rs.130/-
Tick Size
Market Lot 50
Minimum Order Qty 50
Listing Stock Exchange NSE, Mumbai

Analysis

Background :

Indo Tech Transformers Ltd. (ITTL) was incorporated in 1992 and is engaged in the business of manufacturing Distribution and Power Transformers.
ITTL currently manufactures transformers from three facilities. Of these, two facilities are located in Chennai, and one in Palakkad. The three plants are capable of manufacturing 500 - 600 transformers of assorted sizes every month, and have an overall annual capacity of 2450 MVA.
Since inception, ITTL has supplied over 55,000 transformers of various capacities to over 3,000 customers in India. Over the last 8 years, the company has exported around 600 transformers to Nigeria, Sri Lanka, U.K., U.S.A., Ghana, Canada and several other countries.
The company is coming up with an issue of 39,45,130 equity shares at a fixed price of Rs.130 each. The issue consists of Fresh issue of 29,56,750 equity shares and an offer for sale of 9,88,380 equity shares.
The total project cost is of Rs.46.75 crore. The net proceeds of the issue, after deducting all Issue related expenses, are estimated to be Rs. 35.36 Crore.

Object Of The Issue :

Relocation and modernization of Saidapet plant into a new Distribution Transformer Plant of 750 MVA / annum at Chennai for Rs.7.5 crore.
Setting up a new Power Transformer Plant with a Capacity of 2400 MVA /Annum including 220 KV class of transformers for Rs.30.6 crore.
Setting up of Dry Type Transformer Plant at Chennai with a capacity of 120 units per annum for Rs.2 crore.
To meet working capital requirements of Rs.3.4 crore
To meet Issue Expenses of Rs. 3.07 crore.

Strengths :

ITTL currently has an order book position worth of Rs. 135.5 crore as on January 2, 2006 which are pending execution. Of these the order book position for Power transformers is Rs. 115.8 Crores and Distribution transformer is Rs. 19.7 Crores.
ITTL has expanded its manufacturing capacity from 450 Mega Volt Ampere (MVA) to 2450 MVA. The commissioning of the proposed power transformer plant of 2400 MVA of annual capacity will enable ITTL to manufacture power transformers of higher range viz.132 Kilo Volt and 220 Kilo Volt. With increasing demand for higher class of transformers the company will move up the value chain.
Profits and Income of ITTL have grown at a CAGR of 37.14% and 24.08% respectively from FY2001 to FY2005.
The Government emphasis on providing 'Power for All by 2012'. About 100,000 Megawatt (MW) of power generation capacity is likely to be added by 2012. For every 1MW of new capacity that comes up 7 MVA transformers are used across generation, transmission and distribution segments; this implies a demand of 700,000 MVA of transformers unfolding over the next 5 years. This would result in an annual demand of about 140,000 MVA. The increase in demand of transformers due to this program will benefit all organized electrical equipment manufacturers.
Projected growth of Indian economy depends on the growth of the power sector and in order to support a growth rate of around 7% p.a., the rate of growth of power needs to be over 10% annually. This argument supports the growing necessity and importance of transformers in India.

Weaknesses :

State Electricity Boards (SEBs) are ITTL's principal customers. The company derived 63% of its revenue from the SEBs for the FY2005 and half year ending September 2005.
ITTL's group company, Vigneshwara Electricals Ltd. has a negative net worth of Rs.8,76,520 for the year ended March 31, 2005. Vigneshwara Electricals Ltd. has also been incurring losses from past three financial years.
ITTL enjoys a 15% price preference with Tamil Nadu Electricity Board on account of our Small Scale Industry status. The company would lose the SSI benefits once the proposed projects are implemented, as its investments in plant and machinery would have exceeded the limit. Thereafter, it would not be entitled to the price preference.
The ratio of Debtors to total assets has increased from 35.74% to 45.78% from FY2005 to half year ending September 2005.

Valuation :

Book Value per share as on 31st March 2005 is Rs.84.94. Net-worth of ITTL was Rs.23.93 crore. Book values of EMCO Ltd. and Bharat Bijlee Ltd., the comparable industry peers are Rs.153.8 and Rs.92.6 respectively during the same period.
The EPS of the company as on 31st March 05 is Rs.37.76. Post issue PE is 4.43. EPS and PE of EMCO Ltd. and Bharat Bijlee Ltd. are Rs.11.9 and 23.6 and Rs.35.8 and 15.7 respectively. Industry PE is 29.
Return on Networth is 33.38% based on FY 05 results.
NAV per equity share as on 31st March 05 is Rs.84.94. Post Issue Net Asset Value would be Rs. 63.39.
 

vengabeats

Par 100 posts (V.I.P)
Gitanjali Gems Ltd.Issue Open On 16th Feb.

Issue Open 16/02/2006
Issue Close 21/02/2006
Issue Size 17000000
Issue Type Book Building
Face Value Rs.10/-
Price Range Rs.170/- to Rs.195/-
Tick Size Re.1/- Market Lot 35
Minimum Order Qty 35
Listing Stock Exchange Mumbai, NSE


Background :

The company was incorporated in the year 1986 as Pvt. Ltd. Company. In the year 1994 it became a Public Ltd Company and subsequently changed its name to Gitanjali Gems Ltd. (GGL).
GGL is an integrated diamonds and jewellery manufacturing company and among the largest manufacturers and retailers of diamonds and jewellery in India. Its operations include sourcing of rough diamonds from primary and secondary source suppliers in the international market, cutting and polishing the rough diamonds for export and the manufacture and sale of diamond and other jewellery through its retail operations in India as well as abroad.
Company has two-diamond manufacturing facilities, a 100% export oriented unit, which produces gold and platinum studded jewellery and two jewellery-manufacturing facilities, which produce branded jewellery for the company's retail operations in India.
Gitanjali Gems Ltd through its subsidiaries and associate companies operated in retail segment with its most popular jewellery brands namely Nakshatra, D'Damas, Asmi, and Gili.
GGL sell it's branded diamond and other jewellery products in India through it's 620 outlets, including outlets in host stores, 5 stand alone stores and 17 stores set up through franchisee arrangements spread across 30 cities and towns.
GGL had recently entered into a strategic alliance with the World Gold Council to launch a range of jewellery called Gold _Expression, which is based on Italian designs. GGL's arm Digico has also entered into partnership with two other companies and formed a new company called Brightest Circle Jewellery.

Objects of the Issue :

Investment in subsidiaries, joint ventures and associate companies;
Capital expenditure for expansion of retail operations;
Setting up a jewellery manufacturing facility at the proposed Gems and Jewellery Special Economic Zone at Hyderabad;
Setting up of an additional jewellery manufacturing facility at Andheri, Mumbai;
Expansion of the existing jewellery manufacturing facility at SEEPZ area, Mumbai;
Working capital purposes;
Future acquisitions and general corporate purposes and
Meeting Issue Expenses

Strength :

GGL has a strong brand equity reflected by the popularity of its retails brands namely Nakshatra, D'Damas, Asmi, Gili and Giantti. As per Solitaire International, a publication of the Gem and Jewellery Export Promotion Council of India, four of the brands under which the company sell it's branded jewellery, Nakshatra, Asmi, Gili and D'Damas, feature among the ten best known jewellery brands in India.
GGL has a strong sales and distribution network in India. It includes sales through exclusive distributors for our jewellery products, direct sales to large department stores & reputed jewellery stores and direct sales to end customers through company's retail operations. As of September 30, 2005, GGL had 26 distributors across India, 5 exclusive stand alone stores owned by company and approximately 620 outlets, including brand kiosks in large department stores, retail store chains and shopping malls.
Average price of rough diamond (which company import) decreased from Rs. 19,575 per carat in FY01 to Rs. 16,603 per carat in FY04. While the average price of polished diamond (which company export to international market) increased from Rs. 93,766 per carat to Rs. 104,972 per carat in FY04.
With the steps like duty free imports of rough diamonds and the waiver of customs duty on colored, rough gemstones and semi-processed, half-cut and broken diamonds, gems and jewellery industry is bound to grow at a fast pace.

Weakness :

Promoter group companies also operating in the same line of business and may pose threat on procurement of rough diamond from international market.
As major chunk of revenue is coming from export business so any fluctuation in currency could impact the profitability of GGL.
This industry is completely based on fashion and trend and difficult to predict the upcoming trend. Company may face challenge in this respect.
There are many players in this sector who are emerging on export arena like Su raj diamonds & jewellery, Adani export and Rajesh export, so the company may face tough competition.

Valuation :

Net sales of the company declined to Rs. 1,371 crores in FY05 from Rs. 4,017 crores in FY01. While the net profit of the company declined from Rs. 45.5 crores in FY01 to Rs. 8.85 crores in FY05.
As of September 30, 2005, the company had a book value of Rs.86.51 per share, while the net worth of the company was at Rs. 346.03 crores for the same period.
Post issue annualized EPS based on 30th September 2005 earning work out to be Rs. 8.78. The shares are being offered in the price band of Rs. 170 to Rs.195. At P/E multiple of 19 to 22.
 

vengabeats

Par 100 posts (V.I.P)
K Sera Sera Productions Ltd. Issue Open On 16th Feb.

Issue Open 16/02/2006
Issue Close 22/02/2006
Issue Size 5000000
Issue Type Book Building
Face Value Rs.10/-
Price Range Rs.64/- to Rs.70/-
Tick Size Re.1/-
Market Lot 100
Minimum Order Qty 100
Listing Stock Exchange Mumbai

Analysis

Background :

In June 2002, Mantra Trading Company Pvt Ltd. (Mantra) and Vajra Trading Company Pvt Ltd. (Vajra), promoters of K Sera Sera Productions Ltd. (KSS), acquired the shares of Garnet Paper Mills Ltd. (GPML), a company carrying out the business of manufacturing paper, duplex board and other related paper products. GPML was listed in 1995. Subsequently, KSS's Promoters made an open offer in 2002 pursuant to the takeover regulations to acquire shares from the public. The object Clause was amended in October 2002 to carry on the business of entertainment through motion pictures, still pictures, television serials and other allied entertainment products and the name of GPML was changed to the present K Sera Sera Productions Ltd.
KSS has three business divisions viz. Motion Pictures Production, Motion Pictures Distribution and Television, Broadband and wireless.
KSS started its film production and ventured into television content production in the year 2003-04. KSS's subsidiary 'Twenty Twenty' was incorporated in October 2004 to concentrate on television content production.

Object Of The Issue :

Build up infrastructure facility for its existing operations for Rs.4.5 Crores
Fund its distribution division for Rs.3 Crores.
Augment working capital resources for Movie production for Rs.25 Crores.
Finance expenses of the issue

Strengths :

KSS has been awarded with an ISO 9001: 2000 certification for the quality management system, for provision of quality entertainment films, television and distribution services.
KSS has entered into a tripartite agreement with Sahara and Shri Ram Gopal Varma's Varma Corporation Ltd. for production of ten movies under Sahara Banner. As per this Memorandum of Understanding (MoU) the films could be either Produced or Directed by Shri Ram Gopal Varma. KSS has entered into another agreement with Sahara for assignment of worldwide Satellite Telecast Rights for a total consideration of Rs.26.71 Crores.
The company has entered into agreements for co-production of movies with Percept Picture Company Pvt Ltd., Shree Ashtavinayak Cine Vision Ltd., Sohail Khan Production and SLB Films Pvt Ltd.
Income of KSS has grown at a CAGR of 690.7 % for FY2003 till FY2005. The same is Rs.37.5 Crores and Rs.32.2 Crores for the FY2005 and six months ending September 2005 respectively.
Profits of the company have grown at a CAGR of 740.2% for FY2003 till FY2005. The same is Rs.2.26 Crores Rs.5.25 Crores for the FY2005 and six months ending September 2005 respectively.
The Indian Entertainment Industry stands at over Rs. 20,000 Crores today. It is expected to grow in high double digits at 18% per annum compounded annually over the next five years, to reach over Rs 45, 000 Crores by 2009. The largest contributor to this growth will be the television segment followed closely by the film segment.

Weaknesses :

As per the tripartite agreement between KSS, Sahara and Varma Corporation Ltd. (VCL), KSS and VCL have to produce ten movies under the Sahara banner till 29th June 2006. Six movies have been produced so far. In case the remaining four movies are not completed within the stipulated time, KSS and VCL would suffer financial loss @ Rs.5,00,000 per month till the completion of movies.
Also, as per this MoU, KSS and VCL cannot jointly produce or direct any other movie till 29th June 2006 or until completion of the ten Movies whichever is earlier.
KSS is largely dependant on movie releases for major part of its income. The revenue tends to rise or fall depending upon the number of movies released during a financial year. The revenue cycle for any movie is generally four months, so the number of films releases varies from quarter to quarter. Hence there could be a vide fluctuation in the company's quarterly results. These results would also depend on the success of the movie.
The Movie Production expenses of the company have grown at a CAGR of 789.9 % for FY2003 till FY2005.
KSS has reported a negative cash flow from operations. The same being Rs.5.16 Crores and Rs.2.91 Crores for the FY2005 and six months ending September 2005 respectively.

Valuation :

Book Value per share as on 31st March 2005 and 30th September 2005 is Rs.26 and Rs.29.62 respectively. Net-worth of the company for the same period is Rs.37.74 Crores and Rs.42.9 Crores respectively. Book Value per share of Balaji Telefilms Ltd. and Pritish Nandy Communications Ltd. for FY2005 is Rs.32.7 and Rs.57.5 respectively.
Return on Networth (RoNW) for the year ending March 2005 and as on 30th September 2005 is 5.99% and 12.21% respectively. RoNW for Balaji Telefilms Ltd. and Pritish Nandy Communications Ltd. for FY2005 is 23.1% and 6.9% respectively.
The annualized EPS of the company based on September 2005 results on post issue equity is Rs.5.38. Post issue PE is in the range of 11 to 13 times for the price range of Rs.64 to Rs.70. Industry PE is 41.
 

vengabeats

Par 100 posts (V.I.P)
Malu Paper Mills Ltd. Issue Open on 6th March

Issue Open 06/03/2006
Issue Close 10/03/2006
Issue Size 6667000
Issue Type Fixed Price
Face Value Rs.10/-
Price Range Rs.30/-
Tick Size
Market Lot 200
Minimum Order Qty 200
Listing Stock Exchange Mumbai, NSE

Analysis

Background :

MALU PAPER MILLS LTD (MPML), the flagship company of Malu Group, was incorporated in 1994 as "Malu Solvex Ltd". Subsequently the name was changed to Malu Paper Mills Ltd. in 1998
The Company is involved in the manufacturing of Kraft Paper and Newsprint. The company is having two manufacturing unit with a capacity to produce 8,250 Tonnes per annum (TPA) of Kraft papers and 19,800 TPA of Newsprint. MPML has its own R&D unit for quality control and improvements in paper technology.
The company has widespread operation in various regions with Maharashtra contributing to the 60% of the revenue in the FY05. The company has export orders of USD 174,465.20 over a period of 8 years.
The Company proposes to set up 49,500 TPA paper manufacturing plant for manufacturing premium quality newsprint along with 6 Mega Watt (MW) power project for internal generation of power so that the energy cost for the mill is optimized. This will be an import substitute product; MPML will be the first manufacturer of premium newsprint in Central India.

Object of the issue :

To set up a new unit at Nagpur to produce 150 Tonnes per Day (TPD) of Newsprint/Writing Printing paper and 6 MW captive Cogeneration with an estimated cost of Rs.70 crores.
To meet the Public Issue related expenses.
Strength :
Captive power is 1.5 to 3 times cheaper than Grid power and could result into annual savings of about Rs10mn/MW. Company is erecting 6MW captive power plant along with printing paper unit. Thus it will bring down the production cost.
The products of the Company are well accepted in the market. The Company has already become regular supplier to some of leading publishing house of the country such as Lokmat, Jagran, Sakal, Nav Bharat, Hitvada, and Prabhat Khabar.
Company's plant is located in a notified "D+" Area by government of Maharashtra thus the company has been granted certain fiscal incentives. The Company is entitled to Deferment/exemption from payment of sales tax for 15 years subject to maximum of 125% of fixed assets value. The Company is also entitled to refund of Octroi duty/ entry tax subject to maximum of 100% of fixed capital investment, payable/paid on import of all items.
Company's sales have grown at a CAGR of 32.32% from Rs.12.02 crores in FY01 to Rs.48.76 crores in FY05. Net profit of MPML has increased at a CAGR of 85.16% for the same period. Also, Company has shown a constant improvement in its net profit margins from 1% in 2001 to 5.4% in 2005.
Per capita consumption of the paper globally is 52 kg and USA 340 Kg compared to this Indian per capita consumption of paper is meager only 6Kg.
The demand is growing at a faster rate than supply. The demand for paper grew at a CAGR of 5.8% over the last 5 years from 2000-05, whereas the capacity grew at 3.3%. The annual consumption of newspaper in 2005, in the country is about 14.5-15 lakh tonnes, whereas the production is only 7.00 -7.50lac tonnes per annum.

Weakness :

MPML is a very small player in a highly competitive industry with a capacity of only 28,050 TPA, compared to other big national players like HNL, ITC, Ballarpur Ind. etc (have capacity above 300,000 TPA). Most of the listed players in paper industry are situated in central India where the company has its operations.
Post Issue Company's debt component will substantially increase from Rs9.74 crores in 2005 to Rs54.74 crores in 2006. This will have significant impact on company's short-term profitability, as company's new plant will only be operational by 2007-08.
It is expected that the prices of imported wood pulp and waste paper to rise in the medium term which is the key raw material for the company, in line with the rise in global prices of paper.
Progressive custom duty cuts and an appreciating rupee has lead to increased competition from overseas already when the Industry is facing competition from cheap imports from Russia, Indonesia, China and European countries.

Valuation :

Total income of the company has been increased at a CAGR of 32.32% from Rs.12.02 crores in FY01 to Rs.48.76 crores in FY05. While the net profit of the company has been increasing at a CAGR of 85.16% from Rs. 0.12 crores in FY01 to Rs. 2.65crores in FY05. Thus company has consistently shown high growth and operational efficiencies.
The company's net worth as on 31st Dec.2005 is Rs.16.15crores and its Return on Net Worth is 21.44% for the same period.
Post issue annualized EPS based on 30th December 2005 earning work out to be Rs. 2 per share. The shares are being offered in the price of Rs. 30. At P/E multiple of 15 which is higher than the average industry P/E of 10.6. Post issue Price/Book Value is at 3.17 times.
 

vengabeats

Par 100 posts (V.I.P)
Rohit Ferro - Tech Ltd. Issue Open on 7th March

Issue Open 07/03/2006
Issue Close 11/03/2006
Issue Size 16947667
Issue Type Fixed Price
Face Value Rs.10/-
Price Range Rs.30/-
Tick Size
Market Lot 200
Minimum Order Qty 200 Listing Stock Exchange Mumbai, NSE

Analysis

Background :

Rohit Ferro- Tech Ltd. (RFTL) was incorporated in the year 2000 as Rohit Ferro- Tech Pvt. Ltd. In the year 2004 it became a Public Ltd. company and subsequently changed its name to Rohit Ferro - Tech Ltd.
RFTL has been involved in the business of manufacturing of ferro alloys. Ferro Alloys are used in steel making as an additive for imparting strength and quality required in a particular grade of Steel.
Currently RFTL operates a plant in state of West Bengal with three-arc furnace, which produces 40000 Tonnes Per Annum (TPA) of High carbon ferro chrome. The commercial production of first two furnaces started in October, 2003, and the third one started its' commercial production from April, 2005.
RFTL supplies High Carbon Ferro Chrome to leading stainless steel manufacturers in India and exports to overseas market. The export constituted over 45% of the total turnover of the company during FY 2005. RFTL has exported almost 39% of its total production till Sep'05.
RFTL has focus on quality and is ISO 9001:2000 certified.

Object of the issue :

The Company is setting up a Ferro Alloy Plant in the state of Orissa at Kalinganagar industrial complex, Jajpur to increase its total combined capacity to more than 150,000 TPA of Ferro Alloy.

The objects of the issue are :


To Part-finance the installation of four Submerged Arc Furnace of 16.5 MVA of Rs.8,365.14 Lacs.
To meet additional Capital expenditure of Rs. 1,402.12 Lacs.
To meet the Public Issue related expenses of Rs. 250 Lacs.

Strengths :

RFTL has got One Star Export House status by Joint Director general of Foreign Trade in year 2005 which entails the Company an added advantage over it's competitor in terms of additional incentives & simplified procedural formalities.
The company has entered into a contract with NESCO (Northern electric Supply Corporation) for un-interrupted power supply at the proposed Jajpur plant at a lowest tariff of Rs. 2.30 per unit as compared to Rs.3.00 to Rs. 3.50 in other states.
Location of the proposed project at Jajpur, Orissa will facilitate easy access to raw materials and will save freight cost as proposed plant at Jajpur is well connected with Paradeep port and basic raw materials like Chromite Ore and coal are easily available from the mines located nearby the proposed plant.
RFTL has wide sales- distribution network. It has sales depots at Hisar, Ahemdabad, Mandi, gobindgarh, ghaziabad and Raipur.
Total sales including both export and domestic have increased by 197% from Rs. 3,475.07 lacs in FY 2004 to Rs. 10, 510.42 lacs in FY 2005.
Net Profit has increased by 445% from Rs. 331.49 Lacs in year 2004 to Rs. 1,807.95 Lacs in year 2005.

Weaknesses :

The Company is largely dependent on few customers. Top 10 customers constitute 96% of the total revenues in FY 2005.
Steel companies are the main buyers for the ferro product. Steel industry being cyclical in nature, cyclical downturn may adversely affect Rohit Ferro-Tech Ltd
Debt to equity ratio works out to be 1.41 and 1.85 respectively for the FY 2004 and 2005. RFTL has debt to equity ratio of 2.61 till September'05. This is a reasonably high component for a company operating within cyclical industry.
Power constitutes upto 40% of the production cost. There is a demand-supply mismatch in the power industry, with demand exceeding the supply. The company proposes to start a captive power plant in future, till than RFTL would have to depend on external sources for power supply.
Duty on Ferro Alloys has been reduced to 7.5% from 10% in Budget 2006-07. This will increase competition in the market in the form of cheap imports.

Valuations :

Return on net worth has increased from 20.32% in FY 2004 to 46.67% in FY 2005.
The Book Value per equity share of face value of Rs. 10/- each as on September'05 is Rs. 29.36
EPS is Rs. 4.60 based on annualized profit till 30th September 2005. EPS of peer companies Nav Bharat Ferro Alloys Ltd. and VBC Ferro Alloys Ltd. is Rs.16.4 and Rs.9.2 respectively.
Post issue P/E is 6.52 for issue price of Rs.30. Peer Group companies like Nav Bharat Ferro Alloys Ltd. and VBC Ferro Alloys Ltd. have a P/E multiple of 4.70 and 7. 83 respectively as on 30th sep'05. Industry P/E is 8.57.
 

vengabeats

Par 100 posts (V.I.P)
Adhunik Metaliks Ltd.Issue Open on 13th March

Issue Open 13/03/2006
Issue Close 17/03/2006
Issue Size
Issue Type Book Building
Face Value Rs.10/-
Price Range Rs.37/- to Rs.42/-
Tick Size Re.1/-
Market Lot 150
Minimum Order Qty 150
Listing Stock Exchange Mumbai, NSE

Analysis

Background :

Adhunik Metaliks Ltd. (AML) is a part of Adhunik group, an established player in the Iron & Steel and Ferro-Alloys industry having a larger presence in eastern India. AML was incorporated in 2001 as Neepaz Metaliks Pvt Ltd. The company was converted into a public limited in 2004 and its name was subsequently changed to the current.
AML's existing facilities are located in Orissa. Currently it is operating five Directly Reduced Iron units of 100 tonnes per day capacity each in the Sponge Iron Division (Unit I) and has set up Steel Division (Unit II), which consists of a Blast Furnace Complex, one Electric Arc Furnace (EAF), one Ladle Refining Furnace and one Billet Caster. The company has a manufacturing capacity of 2,50,000 tonnes per annum of carbon and alloy steel billet.
Operations of Unit I commissioned in 2003 while that for Unit II in 2005. All the facilities in the Unit II except Captive Power Plant (CPP) have already started the operations in phased manner. The Captive Power Plant is expected to commence operations by April 2006.
AML's product line includes sponge iron, pig iron and alloy billets. The company has initiated rolling of its billets through third party arrangements to meet the current requirement of rolled products in various segments.

Object Of The Issue :

AML is setting up an Integrated Steel Plant (Unit III) for production of high value added steel products to be utilized by the Auto industries and their ancillaries. The total project cost for Unit III is Rs.437.36 crore. Funds are required for setting up following units :


2nd Steel Melting Shop with Vacuum Degassing (VD) Plant with an installed capacity of 1,56,300 Metric Tonnes per annum (MTPA).
Rolling Mill with an installed capacity of 2,20,000 MTPA.
Argon Oxygen Degassing Plant with Bloom Continuous Casting Machine with an installed capacity of 1,19,000 MTPA.
Ferro Alloy Division with an installed capacity of 33,760 MTPA.
2nd Captive Power Plant with an installed capacity of 18 Mega Watt.
Sinter Plant with an installed capacity of 96,000 MTPA.
Oxygen Plant with an installed capacity of 97,92,000 SM3 per annum.
Private Railway Siding.
Captive Iron Ore & Coal Mining.

Strengths :

The Promoters of AML have about four decades of experience in the iron & steel business.
The expansion is aimed at increasing the AML's annual production capacity to 440,000 tonnes from the present 250,000 tonnes.
The company would enjoy low input costs once the captive coal and iron ore mines are allocated.
Weaknesses :
The company has availed of unsecured loans aggregating to Rs. 6.56 crore which are callable anytime. If the lenders call these loans, fully or partly, AML's financial condition could be adversely affected.
AML is yet to receive certain approvals or licenses required for the implementation of the project. The company is yet to obtain approval under Air (Prevention and Control of Pollution) Act, 1981 for period upto March 31, 2006, Water (Prevention and Control of Pollution) Act, 1974 and allotment of mining rights in respect of iron ore is also pending as on date.
AML has not yet placed orders for a large part of the requisite plant & machinery for the project. The cost of plant & machinery has been estimated at Rs. 280.56 crore representing 64% of the total cost of the project. A delay in installing the plant & machinery would delay the project.
Some of the Companies in the Adhunik Group are operating in similar line of business. Adhunik Corporation Ltd., Adhunik Ispat Limited, Adhunik Alloys and Power Limited and Adhunik Steel Limited, group companies of AML, are operating in the same industry segment and are manufacturing sponge iron and alloy steel billets. This could lead to a conflict of interest between these companies and AML.
The project is being financed by 65% of debt component of Rs.284.29 crore. Debt to equity ratio for FY2004 and FY2005 are 1.00 and 1.21 respectively.
The estimated time for the completion of scheduled project is 15 months, commencing from January 2006. The project would be completed by April 2007. Commercial exploration of captive iron ore and coal mine would be commissioned by 27 months.
Steel is a raw material intensive industry. In the recent past, there have been wide fluctuations in the prices of critical raw materials such as iron ore, coal, coke etc both in domestic and international markets. There is a demand supply mismatch for these products with demand exceeding the supply. Non-availability of these raw materials at optimum price would adversely affect the business.

Valuation :

Book value is Rs.14.3 and Rs.18 as on 31st March 2005 and 30th September 2005 respectively. Networth of the company for the same period is Rs. 77.49 crore and Rs.101.49 crore.
Post issue EPS on lower price band of Rs.37 is Rs.1.6 and on higher price band of Rs.42 is Rs.1.6. EPS of its peers Mukand Ltd and Sunflag Ltd. is Rs.25.4 and Rs.2.15 respectively for FY2005.
Price Earning ratio of AML is in the range of Rs.23 to Rs.26. PE of its peers Mukand Ltd and Sunflag Ltd. is 3.24 and 6.81 for FY2005. Highest industry PE is 28.1, while the average PE of the industry is 4.4.
 

vengabeats

Par 100 posts (V.I.P)
Uttam Sugar Mills Ltd. Issue Open On 16th March

Issue Open 16/03/2006
Issue Close 21/03/2006
Issue Size 4000000
Issue Type Book Building
Face Value Rs.10/-
Price Range Rs.290/- to Rs.340/-
Tick Size Re.1/-
Market Lot 20
Minimum Order Qty 20
Listing Stock Exchange NSE, Mumbai

Analysis

Background :

The company was incorporated in the year 1993 as Associated Sugar Mills Ltd. In the year 1998 it changed its name to Uttam Sugar Mills Ltd. (USML).
USML is mainly into manufacturing of sugar through its manufacturing unit in Uttaranchal with a capacity of 6250 TCD (Tonnes crushed per day) and a Co-generation capacity of 10 MW of power. The company also has a refining capacity of 625 TPD, which facilitates USML to produce sugar from raw sugar.
The company is setting up its second sugar unit with a crushing capacity of 7000 TCD in Uttar Pradesh along with co-generation of power with a capacity of 20 MW. Phase I of the expansion has been completed and the unit with a capacity of 3500 TCD and 10 MW power plant has started commercial operation in December 2005. Hence USML's capacity increased to 9750 TCD for the current Sugar Season 2005-06.
USML sugar production has been increased from 6,03,097 quintals in September 30, 2002 to 7,68,240 quintals in September 30, 2005. However sale of sugar for the same period has been increased from 5,63,805 quintals to 9,89,873 quintals.
Company has tie up with Gayatri Iron Pvt. Ltd. for utilizing its Induction furnace with a capacity of 80 TPD (Tonnes per day) of steel ingots, which USML set up for exploiting its excess power generated during the crushing season.

Objects of the issue :

To set up two new grassroot units for manufacture of premium quality white sugar with a capacity of 4500 TCD and 5000 TCD along with co-generation of power with a capacity of 15 MW & 30 MW at village Khaikheri (Unit III) and village Shermau (Unit IV) respectively.
To meet the Issue expenses.

Strengths :

USML is one of the few sugar manufacturers in India producing sugar through the Defeco Remelt Phospho Floatation Process (DRP). It helps company to produce sugar with negligible sulphur content. This sugar meets the European standards of refined sugar (Colour of less than 45 IU) and is preferred by industrial buyers.
Company has excellent relationship with sugarcane farmers, which is reflected by the timely payment since the company does not have any dues towards sugarcane arrears to farmers as on 30th September. USML also helps farmers in harvesting and transportation of cane, which saves the farmers effort, time and money. This enables it to get fresh and mature sugarcane, which increases the yield of sugar.
USML has better sugar recovery rate as compared to the average sugar recovery rate in Uttaranchal and Uttar Pradesh as per the Sugar Journal "INDIAN SUGAR" June 2005, published by ISMA (Indian Sugar Mills Association).
Company's manufacturing unit in Uttaranchal is capable of producing sugar not only from sugarcane but also from raw sugar. This unit has a sugar refining capacity of 625 TPD (Tonnes per day) which facilitates refining of raw sugar, thereby enabling it to have an increased utilization of refining capacity as compared to majority of other sugar manufacturers.
The promoters of the company have total experience of over 20 years in providing turnkey solutions for setting up sugar mills and well known in the region for the same.

Weaknesses :

Company might face liquidity crunch due to the implementation of several projects in quick succession.
Company's debt equity ratio stood at 2.81 as on 30th September 2005, it may pose problem in raising funds in future.
The Company operates in the highly regulated market. Change in the Government policy may affect company's bottom-line.
Sugar industry is a cyclical industry and highly dependent on agriculture production which again depend on monsoon.

Valuation :

USML financial improves from a loss of Rs. 1.24 crores on 31st March 2001 to a profit of Rs. 26.41 crores as on 30th September 2005. Net sales of the company increased from Rs. 6.5 crores in 31st March 2001 to Rs 188 crores as on 30th September 2005.
The Net worth of the Company as on 30th September 2005 stood at Rs. 610.5 crores. While the Book value per share as on 30th September 2005 was at Rs. 31.7.
Company's Return on net worth as per 30th September 2005 stood at 44.8%. While for it's nearest listed competitor like Dwarikesh sugar and Renuka sugar ratio was at 42.8 and 86.5.
Post issue annualized EPS based on 30th September 2005 earning work out to be Rs. 10.25. The shares are being offered in the price band of Rs. 290 to Rs.340. At P/E multiple of 28 to 33.While its nearest listed competitor like Dwarikesh sugar and Renuka sugar ratio was trading at a P/E of 13.1 and 27.4.
 

ViJiT

Vijith Pujari
Uttam Sugar Mills Ltd. Issue Open On 16th March

Uttam Sugar Mills Ltd. Issue Open On 16th March

Issue Open 16/03/2006
Issue Close 21/03/2006
Issue Size 4000000
Issue Type Book Building
Face Value Rs.10/-
Price Range Rs.290/- to Rs.340/-
Tick Size Re.1/-
Market Lot 20
Minimum Order Qty 20
Listing Stock Exchange NSE, Mumbai

Analysis

Background :

The company was incorporated in the year 1993 as Associated Sugar Mills Ltd. In the year 1998 it changed its name to Uttam Sugar Mills Ltd. (USML).
USML is mainly into manufacturing of sugar through its manufacturing unit in Uttaranchal with a capacity of 6250 TCD (Tonnes crushed per day) and a Co-generation capacity of 10 MW of power. The company also has a refining capacity of 625 TPD, which facilitates USML to produce sugar from raw sugar.
The company is setting up its second sugar unit with a crushing capacity of 7000 TCD in Uttar Pradesh along with co-generation of power with a capacity of 20 MW. Phase I of the expansion has been completed and the unit with a capacity of 3500 TCD and 10 MW power plant has started commercial operation in December 2005. Hence USML's capacity increased to 9750 TCD for the current Sugar Season 2005-06.
USML sugar production has been increased from 6,03,097 quintals in September 30, 2002 to 7,68,240 quintals in September 30, 2005. However sale of sugar for the same period has been increased from 5,63,805 quintals to 9,89,873 quintals.
Company has tie up with Gayatri Iron Pvt. Ltd. for utilizing its Induction furnace with a capacity of 80 TPD (Tonnes per day) of steel ingots, which USML set up for exploiting its excess power generated during the crushing season.

Objects of the issue :

To set up two new grassroot units for manufacture of premium quality white sugar with a capacity of 4500 TCD and 5000 TCD along with co-generation of power with a capacity of 15 MW & 30 MW at village Khaikheri (Unit III) and village Shermau (Unit IV) respectively.
To meet the Issue expenses.

Strengths :

USML is one of the few sugar manufacturers in India producing sugar through the Defeco Remelt Phospho Floatation Process (DRP). It helps company to produce sugar with negligible sulphur content. This sugar meets the European standards of refined sugar (Colour of less than 45 IU) and is preferred by industrial buyers.
Company has excellent relationship with sugarcane farmers, which is reflected by the timely payment since the company does not have any dues towards sugarcane arrears to farmers as on 30th September. USML also helps farmers in harvesting and transportation of cane, which saves the farmers effort, time and money. This enables it to get fresh and mature sugarcane, which increases the yield of sugar.
USML has better sugar recovery rate as compared to the average sugar recovery rate in Uttaranchal and Uttar Pradesh as per the Sugar Journal "INDIAN SUGAR" June 2005, published by ISMA (Indian Sugar Mills Association).
Company's manufacturing unit in Uttaranchal is capable of producing sugar not only from sugarcane but also from raw sugar. This unit has a sugar refining capacity of 625 TPD (Tonnes per day) which facilitates refining of raw sugar, thereby enabling it to have an increased utilization of refining capacity as compared to majority of other sugar manufacturers.
The promoters of the company have total experience of over 20 years in providing turnkey solutions for setting up sugar mills and well known in the region for the same.

Weaknesses :

Company might face liquidity crunch due to the implementation of several projects in quick succession.
Company's debt equity ratio stood at 2.81 as on 30th September 2005, it may pose problem in raising funds in future.
The Company operates in the highly regulated market. Change in the Government policy may affect company's bottom-line.
Sugar industry is a cyclical industry and highly dependent on agriculture production which again depend on monsoon.

Valuation :

USML financial improves from a loss of Rs. 1.24 crores on 31st March 2001 to a profit of Rs. 26.41 crores as on 30th September 2005. Net sales of the company increased from Rs. 6.5 crores in 31st March 2001 to Rs 188 crores as on 30th September 2005.
The Net worth of the Company as on 30th September 2005 stood at Rs. 610.5 crores. While the Book value per share as on 30th September 2005 was at Rs. 31.7.
Company's Return on net worth as per 30th September 2005 stood at 44.8%. While for it's nearest listed competitor like Dwarikesh sugar and Renuka sugar ratio was at 42.8 and 86.5.
Post issue annualized EPS based on 30th September 2005 earning work out to be Rs. 10.25. The shares are being offered in the price band of Rs. 290 to Rs.340. At P/E multiple of 28 to 33.While its nearest listed competitor like Dwarikesh sugar and Renuka sugar ratio was trading at a P/E of 13.1 and 27.4.

Source :- www.idiabulls.com
 

vengabeats

Par 100 posts (V.I.P)
Powersoft Global Solutions Ltd. Issue Open on 23rd March

Issue Open 23/03/2006
Issue Close 29/03/2006
Issue Size 5400000
Issue Type Fixed Price
Face Value Rs.10/-
Price Range Rs.22/-
Tick Size
Market Lot 250
Minimum Order Qty 250
Listing Stock Exchange Mumbai, Ahemdabad, Bangalore, Chennai

Analysis

Background :

Powersoft Global Solutions Ltd. (PGSL) was originally incorporated in November 1992 as Bhandari Food Flavours Ltd. Its name was changed to the present in March 2000.
PGSL provides IT solutions and services like application development, maintenance and integration, software product development, engineering outsourcing, Radio Frequency Identification (RFID) solutions, research and development services and Business Process Outsourcing.
It provides business solutions to manufacturing, logistics, retail, consumer electronics, pharmaceuticals, aerospace, defense and utilities industries in North America, Europe and the Asia-Pacific.
PGSL is a subsidiary of Nirvann Corp, North America and has also entered into the agreement with Nirvann Corp. to market and promote the services and solutions developed by the company.

Objects of Issue :

Upgradation of existing infrastructure facilities with an investment of Rs. 262 lakhs.

To set-up an R&D center, an investment of Rs. 80 lakhs
To meet the expenses of Overseas Marketing with an investment of Rs. 251 lakhs.
To meet the costs of strategic acquisitions with an investment of Rs. 3 lakhs.
To meet the Working Capital requirement of Rs.222 lakhs and the issue expenses of Rs.75 lakhs.

Strengths :

The Company is one of the few Indian IT providers to offer comprehensive RFID solutions, which is one of the fastest growing industries in the world today.
PGSL is a debt free company; and whole project cost is being funded by equity proceeds alone hence it will be easy for the company to raise loans in event of any further expansions.
PGSL is expanding its operations and has acquired CADGIS Consultants in March 2005 for Rs. 96 lacs to be payable partly by issuing 3,00,000 shares of PGSL and balance Rs. 30 lacs by cash. It specializes in geospatial solutions and has strength of 50 professionals having specific domain expertise.
PGSL's sales have grown from Rs.73 lakhs in 2000-01 to Rs.667 lakhs in 2004-05 at a compounded annual growth rate (CAGR) of 55.4%. While the net profit of the company has been increasing at a CAGR of 488.9% from Rs. 0.10 lakhs in FY02 to Rs. 120 lakhs in FY05.

Weakness :

The company had made a public issue during 1996 but did not receive the money due on calls and that project failed badly. Against a projected income of Rs. 1300 lakhs in 1999 the company could only earn 7.34 lakhs. The profitability was hit and the company made losses in 1998 and 1999.
The 'Objects of the Issue' for which the funds are being raised has not been appraised by any Bank or Financial Institution. Fund requirement is the company estimates and the funds received from the issue will be deployed at the sole discretion of the Management.
PGSL, a small player in the IT space with only 70 professionals on rolls, is exposed to intense competition from existing large players as well as global players like IBM and Accenture deciding to enter the Indian market and emulate the Indian business model.
Compared to its competitors like 3i Infotech Ltd., Geodesic Information Systems Ltd., Hinduja TMT Ltd. iGate Global Solutions Ltd., Logix Microsystems Ltd., Onward Technologies Ltd. PGSL's pre issue EPS is the lowest at 1.85 For FY05. Its return on net worth (RONW) as on FY05 is amongst the lowest at 6.05%. Its select peer group RONW ranges from 4% to 66.57% and EPS ranges from Rs.4- Rs.10 for FY05.

Valuation :

Company has shown 30% YOY growth in FY05 from Rs.513 lakhs to RS.667 lakhs. Also, company's net profit margins have improved from 16.3% in FY04 to 18.02% in FY05.
PGSL's year ended Sept 05 RONW was 6.05%. The company's net worth as on 31st Dec.2005 is Rs. 2013 lakhs. Its book-value per share as on 31/12/2005 is Rs.30.96.
Post issue EPS for FY05 is Rs. 1.01 per share. The shares are being offered at the price of Rs. 22. At P/E multiple of 29.75, the average industry P/E is 30.24.
 

vengabeats

Par 100 posts (V.I.P)
Kewal Kiran Clothing Ltd.Issue Open on 20th March

Issue Open 20/03/2006
Issue Close 23/03/2006
Issue Size 3100000
Issue Type Book Building
Face Value Rs.10/-
Price Range Rs.250/- to Rs.275/-
Tick Size Re.1/-
Market Lot 25
Minimum Order Qty 25
Listing Stock Exchange NSE, Mumbai

Analysis

Background :

The company was incorporated in the year 1992 as Kewal Kiran Apparels Pvt. Ltd. In the year 2005 it became a Public Ltd. Company and subsequently changed its name to Kewal Kiran Clothing Ltd. (KKCL).
KKCL is engaged in the business of designing, manufacturing, branding and selling of ready-made apparels in the men's segment. The company manufactures a range of apparels with brands as 'Killer' in Denim and 'Easies' in casual segment.
KKCL has four manufacturing units with a total annual capacity of 2 million pieces located in Mumbai, Gujrat and Daman.
The company has in- house design team that works on over 500 designs in a season to keep pace with new trends and fashion.
The company has got the CNBC TV 18 and ICICI Bank "Emerging India Award" for the best SME Company in Textiles and Apparel category in year 2005.

Object of the Issue :

To set up 114 additional exclusive outlets of Rs.346 million under the existing brand name of "K- Lounge" across the India.
To set up new manufacturing unit of Rs.323 million for manufacturing of men's apparel to increase total annual capacity to 4 million pieces by FY 2008.
To build corporate office for Rs.50 million.

Strengths :

KKCL has a strong marketing and distribution network of 66 distributors spread across all the metros, mini metros and large cities. The company has 29 exclusive showrooms under the brand name "K-Lounge". KKCL is expecting to have 143 exclusive outlets by 2008.
The company has fully integrated operations facility, from cutting to finishing and packaging, availability of all these facilities allow KKCL to reduce its cost of production and lead times.
KKCL operates within a fashion conscious industry. Therefore, the company is required to forecast new trends for that KKCL has its own in-house design team who designs the products as per the customer's requirement.
KKCL is eyeing on inorganic growth opportunities by acquiring brands having presence in the men's formal, women's wear and kids wear. This would enhance manufacturing and marketing capabilities of KKCL and would help in tapping a huge consumer base.
Import duty on raw material has been reduced in Union Budget 2006-07. It would have positive impact on textile industry, as it would help offset the rising input cost for the manufacturers in domestic market.

Weakness :

The company does not have long-term contracts with its buyers and moreover its business is seasonal in nature, so there is no assured source of revenue for the company.
The company is largely dependent on external suppliers for the supply of raw materials and fabric, which constitutes 77% of total raw material cost. It has not entered in to any contract with its suppliers to ensure timely supply of the raw materials. Therefore, non-availability of the raw material at the right time may affect its profitability.
The company's net profit declined to Rs.38.28 million in FY 2005 from Rs.38.81 million in FY 2004. KKCL had incurred net losses of Rs.6.47 million and 3.58 million in FY 2004 and FY 2003 respectively. KKCL had negative cash flow of Rs.2.43 million in FY 2004.
The Indian government recently decided to allow foreign direct investment (FDI) up to 51% in retail outlets meant exclusively for single brands. This will allow global players an easier access to Indian markets, which may result in increased competition faced by domestic players.
In the Post Quota regime, Company's export will face problem from international manufacturers such as from China since these countries have advantageous position in terms of cost efficiency because of the low labour costs.

Valuation :

Gross revenue and Net profit have grown at a CAGR of 155.6% and 205.6% respectively since 2003.
Post issue annualized EPS based on 31st Dec.2005 is Rs. 8.62.The shares are being offered in the price band of Rs.250 to Rs.275. P/E multiple ranges from 29 to 31.9. Peer group companies like Zodiac clothing Co. Ltd. and Provogue India Ltd. has a P/E of 36.2 and 46.14 respectively as on 31st March'05. Industry P/E is 32.5.
Return on net worth decreased to 44.69% in FY 2005 from 81.94% in FY 2004. The book value per share as on March 31, 2005 is Rs.85.64.
 

vengabeats

Par 100 posts (V.I.P)
Lokesh Machines Ltd. Issue Open on 7th Apri

Issue Open 07/04/2006
Issue Close 13/04/2006
Issue Size 3000000
Issue Type Book Building
Face Value Rs.10/- Price
Range Rs.130/- to Rs.140/-
Tick Size Re.1/-
Market Lot 50
Minimum Order Qty 50
Listing Stock Exchange Mumbai , NSE
Website
Lokesh Machines Ltd.


Analysis

Background :

Lokesh Machines Ltd. (Lokesh) was incorporated in1983 and started its commercial production from 1986.
Lokesh is in the manufacturing of CNC machines.The current operations of the company can be categorised into CNC lathes, vertical machine centers (VMC), horizontal machining centers (HMC), special purpose machines (SPM) and auto components. The company also caters to foreign market and has orders for Italy, Germany and Japan.
At present, the company has a facility for machining and supply of 1,20,000 each of cylinder blocks and cylinder heads per annum, which is being utilized for supplies to Mahindra and Mahindra Ltd.
The key customers of the company include Mahindra & Mahindra Ltd., Bharat Forge Ltd., Ashok Leyland Ltd. and Everest Kanto Cylinder.

Object Of The Issue :

Setting up the facility for machining and supply of cylinder blocks and cylinder heads for commercial vehicles for Rs.2,098.5 lakhs
Modernization Project for upgradation of the existing facilities for manufacture of machines and machine tools for Rs.1,829.26 lakhs
To meet working capital needs and issue expenses of the company for Rs.773.32 lakhs.

Strengths :

Lokesh has entered into an agreement with Ashok Leyland Ltd. to supply cylinder block and cylinder heads for commercial vehicles for a period of three years. The company is setting up an additional facility for machining and supply of 40,000 each of cylinder blocks and cylinder heads per annum. The entire facility will be utilized to execute the said agreement with Ashok Leyland Ltd. with effect from February 1, 2006.
The company intends importing state of the art mother machines to augment and upgrade the capacities and capabilities of the equipment currently available. This will enhance the competence of the company to manufacture with machines of greater versatility and effectiveness
The company is making efforts to enhance export revenue. In financial year 2006, 25 machines (375,000 euro) were exported. The company has confirmed export orders for 42 machines for the financial year 2007, valued at approximately Euro 630,000.
Revenue and Net profits of the company has grown at a CAGR of 28.6% and 110.3% respectively from FY2001 to FY2005.
The Company's current aggregate order booking condition as on February 28, 2006 is around Rs.3,118 lakhs. Revenue reported for seven months ending October 2005 is Rs.4,053.94 lakhs.
The domestic market for CNC lathes is expected to grow at a CAGR of 32.4% till FY2007 in terms of revenues. CAGR for HMC, VMC, SPM in terms of revenue for the same period are 30.2%, 31% and 19.4% respectively. Indian automotive industry is registering a growth rate of above 20% per annum.

Weaknesses :

Lokesh's basic raw material is mild steel constituting around 60% to the total cost. Steel is a highly price intensive industry. Current trend reflects firming up of steel prices in global and domestic markets. The same would increase the cost of raw material for the company.
The company faces competition from the unorganized sector. The competition comes mainly in the segments of SPMs and CNCs. HMT Ltd., Lakshmi Machine Works, Ace Designers Ltd. are the competitors in domestic market.
The company is in a business that involves long manufacturing cycle. Realization of revenues is delayed causing pressure on working capital requirement. Debtors to sales ratio for FY2005 and seven months ending October 2005 are 24.37% and 47.8% respectively.

Valuation :

The company has reported a Net Profit of Rs.522.48 lakhs for the year ending March 2005, an increase of 452% over previous years net profit. Net profit margin was 8.66% for FY2005 as against 2.52% for FY2004. Inventory for FY2005 was Rs.2378.91 lakhs.
Sales of the company registered a growth of 60.8% in FY2005. The same was Rs.6,035.18 lakhs as against Rs.3,753.17 lakhs in FY2004.
EPS for FY2005 is Rs.5.9. Post issue EPS based on October 2005 results is Rs.3.4. PE for a price range of Rs.130 to Rs.140 is in the range of 37-41. Industry PE is 23.4.
 

vengabeats

Par 100 posts (V.I.P)
JRG Securities Ltd. Issue Open on 17th April

Issue Open 17/04/2006
Issue Close 21/04/2006
Issue Size 3625000

Issue Type Fixed Price
Face Value Rs.10/-

Price Range Rs.40/-
Tick Size

Market Lot 150
Minimum Order Qty 150

Listing Stock Exchange Mumbai

Website:-JRG Securities Ltd.

Analysis

Background :


The company was incorporated as JRG Associates Pvt. Ltd. in the year 1994. It got converted into Public limited in the year 2003 and subsequently changed its name to JRG Securities Ltd. (JRGSL)
The company is into the business of broking on the Indian equity and commodity markets, distribution of Mutual funds and direct broking of life and non-life insurance.
JRGSL offers various services including Internet and Phone based trading, depository services, commodity trading on the leading exchanges such as MCX, NMCE, NCDEX and IPSTA, personalized portfolio management services and financial advisory services to its clients.
Company is empanelled with top ten mutual fund houses in India under its mutual fund operations.
JRGSL is the first broking company in the country to offer the facility to trade commodities on the leading exchanges in India through specific mobile phones through special mobile trading service initiated with the help of Financial Technologies India Ltd. and Nokia.


Objects of the issue :


Technology upgradation of existing I.T infrastructure.
Establishment of 30 new regional offices in India.
Formation of a subsidiary company and a limited liability company in Dubai.
To meet issue related expenses.
Strengths :
Company has membership of the premier derivative and commodity exchanges in the country. This allows JRGSL to offer its clients trading facilities in these investment classes, under one roof.
Company has developed the new technology to trade in commodities called Mtrade.Using Mtrade JRGSL's clients can trade on the commodity exchanges in real time using their Nokia mobile phones. This service gives company a competitive edge over others.
JRGSL is going for massive expansion from 12 regional offices to 42 regional offices and proposes to increase its branch network to 1,500 by 2008. Successful execution of these will allow company to increase its revenue significantly.
Continuing up-trend in the capital market, favorable economic condition and government inclination for more liberal and transparent financial markets will allow brokerage firms to continue to enjoy good margins.

Weakness :

JRGSL is a Cochin based brokerage company and most of its operations concentrated in south India. Company may face difficulties in attracting new customers in north India where it is planning to open offices.
JRGSL is into highly competitive business with several numbers of well-established brands in the industry like Indiabulls, Kotak, Geojit and Sharekhan. Going further, company could face margin pressure.
JRGSL has contingent liability, which is not acknowledged as debts of Rs. 7.25 crores (82% of total net worth) as of September 30, 2005, if these contingent liabilities materialize, company's financial condition could be adversely affected.
Brokerage business is depending on the volatility in the share market and economic conditions; high volatility and economic downturn, which may affect the business of the industry.

Valuation :



The company's total income increased at a CAGR of 45% to Rs. 10.04 crores in FY05 from Rs. 2.27 crores in FY01. While the net profit of the company increased at a CAGR of 25% to Rs. 1.47 crores in FY05 from Rs. 0.66 crores in FY01.
Company's net worth as on 30th September 2005 stood at Rs. 8.81 crores and Book value per share for the same period was Rs. 10.85.
Post issue annualized EPS of the company on the basis of September's earnings stood at Rs.1.06. The shares are being offered at a price of Rs. 40 with a P/E multiple of 37.73.
Source:- Indiabulls
 

vengabeats

Par 100 posts (V.I.P)
Gangotri Textiles Ltd. Issue Open On 18th May

Issue Open :- 18/05/2006
Issue Close :- 23/05/2006
Issue Size :- Equity shares aggregating Rs. 5500 Lakhs
Issue Type :- Book Building
Face Value :- Rs.5/-
Price Range :- Rs.41/- to Rs.46/-
Tick Size Re.:- 1/-
Market Lot :-125
Minimum Order Qty: - 125
Maximum Subscription Amount for Retail Investor:- Rs. 100,000 /-


Listing Stock Exchange :- Mumbai, NSE, Chennai, Coimbatore, Kolkatta
Registrar:- To The Issue Intime Spectrum Registry Ltd.
Book Running Lead Managers :- SBI Capital Markets Ltd., Keynote Corporate Services Ltd.

Registered Office Address :- 473/2, P.K.D. Nagar, Peelamedu, Coimbatore - 641 004
Phone :- 91 - 422 - 4332100 Fax 91 - 422 - 2576742
Email:- [email protected]
Website :-Gangotri Textiles Ltd.

Analysis

Background :


The company was incorporated as Gangotri Textiles Pvt. Ltd. in the year 1989. It got converted in to public ltd. company in the year 1993 and subsequently changed its name to Gangotri Textiles Ltd. (GTL).
The company is into the business of trading and processing of yarn from cotton waste. It is an operator in open-ended spinning. GTL consumes its yarn to manufacture home textiles like bed linens and table napkins. It uses hosiery yarn for knitting and manufactures garments in the name of Tibre brand trousers.
The company has installed capacity of 5,904 rotors and ring spinning capacity of 17,376 spindles. The company has also installed 2 windmills with total capacity of 3.30 MW.
GTL entered retail segment through its first retail outlet, Tibre World, in Coimbatore in the year 2000 and its Tibre brand trousers are available through 750 outlets.
The company had gone public in the year 1994 and is listed on the BSE and NSE. It is currently trading at Rs.57 as on May 17, 2006 in NSE i.e. at a premium of 24% to its higher price band.


Objects of the issue :


GTL proposes to raise Rs.55 crore from the issue.

To set up Spinning I - a ring spinning unit of 19,200 spindles along with two for one (TFO) twister to produce 2/30s Polyester Cotton Yarn with a capacity of 10,112 kgs/day.
To set up Spinning II- a ring-spinning unit of 31,200 spindles along with TFO to produce 2/40s cotton yarn with a capacity of 10,205 kgs/day.
To set up weaving and processing plant of average capacity of 51,000 mtrs/day of bottom weight and shirting fabric.
To set up modern garment unit with a capacity of 3,000 pieces/day for men and women's trousers.
To install six Wind Energy Generators (WEG) of 1.65 MW each aggregating a total installed capacity of 9.90 MW.
To meet the issue related expenses.


Strengths :


The company has developed wide distribution and marketing network through direct selling agents in Southern India. This enables the company to tap larger client base.
GTL has an in house design team to forecast and to keep pace with changing fashion trends. This aids in improvising its Tibre brand trousers. The company also intends to extend its business in women apparels.
The promoters of the company have vast experience of 15 years in area of business.
Cotton which is key raw material for the spinning unit and which accounts for around 73% cost of production is abundantly available in India.


Weakness :


The net profit of the company was down 50.42% at Rs. 3.25 crore in FY 2005 as compared to Rs. 6.56 crore in FY 2004.
The company has high Debt/equity ratio of 3.82 for the year ended March 2005. The interest coverage ratio has decreased to 3.77 in FY 2005 from 4.02 in FY 2004. The company has total debt of Rs. 123.25 crore for the nine months ended December 2005 as against Rs.109.33 crore in FY2005.
The domestic readymade-garment industry is highly fragmented and is highly competitive with small and as well as big players operating within the industry.
The Indian government recently decided to allow foreign direct investment (FDI) up to 51% in retail outlets meant exclusively for single brands. This will allow global players an easier access to Indian markets, which may result in increased competition faced by domestic players.


Valuation :


Return on net worth decreased from 24.24% in March 2004 to 11.37% in March 2005. Current net worth of the company for nine months ended December 2005 is Rs. 33.29 crore.
EPS for FY 2005 is Rs. 3.39/-. Post issue annualised EPS based on December 2005 ranges from Rs. 3.63/- to Rs. 3.88/-.
The shares are being offered in the price range of Rs. 41/- to Rs. 46/-. Post issue P/E multiple ranges from 11.26 to 11.85. Industry average P/E is 17.5.

Source:-Indiabulls
 
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