Latest Grey Market Premium Dt. 4-2-2008

Company Name	Offer Price (Rs.)	Premium (Rs.)
Reliance Power	450	150 to 160
Emaar MGF	540 to 630	45 to 50
J. Kumar Infra Projects	110	Discount
Cords Cable Ind.	135	5 to 8
KNR Construction	170	Discount
On Mobile Global	440	20 to 25
Bang Overseas	207	20 to 25
Shri Ram EPC	290 to 330	Discount
IRB Infra	185 to 220	70 to 75
Wockhardt Hospital	225 to 260	Discount
Manjushree Extrusion	45	2 to 3
Tulsi Extrusions	80 to 85	9 to 11
SVEC Construction	85 to 95	8 to 10
Globus Spirit	140 to 160	--

Latest Grey Market Premium Dt. 2-2-2008

Company Name

Offer Price (Rs.)

Premium (Rs.)

Reliance Power

450

150 to 160

Emaar MGF

540 to 630

45 to 50

J. Kumar Infra Projects

110

Discount

Cords Cable Ind.

135

5 to 8

KNR Construction

170

Discount

On Mobile Global

440

20 to 25

Bang Overseas

207

20 to 25

Shri Ram EPC

290 to 330

Discount

IRB Infra

185 to 220

70 to 75

Wockhardt Hospital*

225 to 260

Discount

Manjushree Extrusion

45

2 to 3

Tulsi Extrusions

80 to 85

9 to 11

SVEC Construction

85 to 95

8 to 10

Globus Spirit

140 to 160

--

Tulsi Extrusions IPO

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Latest Grey Market Premium:8-10
Price Band: 80 to 85

Tulsi Extrusions is presently manufacturing 10,483 MT of PVC Pipes which is a low margin business, wherein raw-material costs constitutes over two-third. Also, this sector has lot of competition from the unorganized sector. For FY 07, topline of the company was at Rs 60 crore, of which Rs 23 crore, came in from trading turnover. PAT for the year, was at Rs 4.16 crore, which resulted into an EPS of Rs 7.35. Prior to these, bottomline was below Rs 10 lakhs, till FY 05, which rose to Rs 1.23 crore in FY 06, on a topline of Rs 17 crore. Obviously, trading turnover was missing in all these years. Strangely, inspite of such poor performance, the management of the company went ahead with issue of two bonus issues in year 2006. On 31-03-06, bonus of 16.66% was issued, while on 23-12-06, bonus of 50% was issued. Strangely, same has been written as 600% and 200%, respectively on page 15 of RHP in capital history of the company. Due to this, equity, rose to Rs 5.68 crore and reserves came down to Rs 5.98 crore, giving book value of Rs 20.50. To cover up this, 8 months ending 30-11-07, shows a topline of Rs 42 crore, with PAT of Rs 4.72 crore. How come this sudden jump in profitability? Kisan Mouldings, a listed company, is engaged into manufacturing PVC Pipes and fittings and furniture. This company, for December 07 quarter, had reported a topline of Rs 36 crore and PAT of Rs 1.88 crore, on equity of Rs 7.04 crore, giving an EPS of Rs 2.67. FY 08 EPS is likely to above Rs 9. Promoters stake of 72% is also quite respectable. Inspite of this, the share is now ruling at Rs 45 per share, ruling at a PE multiple of close to 5. The sector enjoys very low discounting, in single digit, and this issue therefore, is very richly priced. Better plays are available in the secondary market and it would be advisable to buy existing stocks.

IRB Infrastructure IPO

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Latest Grey Market Premium : 70-75
Price Band 185 - 220

IRB Infrastructure Developers, an infrastructure and construction company in India with extensive experience in the roads and highways sector and currently involved in 12 BOT projects in this sector, proposes to enter the capital markets on January 31, 2008 with a public issue of 5,10,57,666 equity shares of Rs 10 each through 100% book building process.

RB Infrastructure is a very good issue. Price band looks reasonable. One should apply for the issue.

Wockhardt Hospitals IPO

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Latest Grey Market Premium : Discount
Price Band:225 to 260

Free pricing regime seems to mean issuing shares to promoters at par, or maybe, even at a discount while issuing to the public, 30 times of its face value. The company had issued 50 lakh shares of Rs 10 each, at par, on 11th June 2007, to the Chairman of the company Khorikawala. To add sweetener to this, bonus of 35% was issued on 3rd July, 2007. See, how generous, the companies are towards its promoters. This has led the paid-up equity of the company to rise to Rs 80 crore.

Inspite of the company’s hospital in operations, since 2002, financial performance is yet to catch on, especially on the bottomlines. Mumbai Hospital with 191 beds started in July 2002, while Bangalore Hospital with 92 beds started in 1991. FY 07 financial performance has been nothing great with total income at Rs.237 crores, PBT of Rs 16.18 crore and PAT of Rs 15.59 crore. For 9 months ending 31-12-07 total income was at Rs 260 corre with PBT of Rs 16.32 crore and PAT of Rs 7.31 crore. Thanks to Deferred Tax of Rs 6.55 crore, which has reduced the bottomline.

The company is now setting up 10 hospitals with an estimated outlay of Rs 636 crore, of which Rs 569 crores is being sourced from the proposed IPO. The total plan of the company is to set up 17 hospital with 3,419 beds. Rs 285 crore is being mobilized to liquidate the debt of the company, maybe to bring it on better financial parameters.

At the upper band, the company intends to mobilize about Rs 780 crore, of Rs.310 per share, by diluting 24.06% stake. This values the company at around Rs 3,200 crore excluding net debt of Rs 150 crore. Apollo Hospital with annual revenue of over Rs 1,000 crore and PAT of Rs 80 crore is valued at about Rs.2,300 crores, while expected EPS for FY 08 is close to Rs 20. This stock is ruling at a PE multiple of close to 22 on historic earning. Similarly, Fortis Health Care has a market capitalization of Rs 1,800 crore while adding debt thereto of Rs.600 crores, it works out at Rs 2,400 crore. Even Fortis has an annual topline of Rs 500 crore, though the company has yet to post its bottomline in black.

If established profit making company like Apollo Hospitals or company from Ranbaxy stable with promoters’ stake of 75% is available at much cheaper valuations, why to go for this issue, which is definitely very expensive. Afterall, one can’t pay such a steep price for having Wockhardt tag.

Emaar MGF IPO

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Grey Market Premium 45 to 50
Price Band: 540 to 630

Emaar MGF Land is diluting about 10.40% through this issue and the expanded equity of Rs 985.93 crore would translate into a market capitalization of Rs 62,114 crore, at the upper band of Rs 630 per share. This is without considering any gain being accrued to the prospective investor and purely on primary market valuations.

The company seems to be only mobilizing land and had 13,024 acres of land as at 31-12-07, which would give 566 million sq. ft. of saleable area to the company. Of total land bank, 80% is agricultural land and not a single sq. ft. is in Mumbai, which is the remunerative real estate market, and dream of every realty company to own and develop property in this city. Of this, only 17.80 million sq. ft. is under development.

If we take a further break up of proposed development, residential plot is for 136.5 million sq. ft. while 318.80 million sq. ft. is for residence. This constitutes 80% of the total saleable area. Residential always have the lower realization for sale on ownership basis as well as for rental or lease.

While acquiring this land stock, debt of the company rose to Rs 5,288 crore as on 12-01-08, with net worth of Rs 4,839 crore, which includes preference share capital of Rs 923 crore.

FY 07 financial performance, (being its first year of operations), posted a net loss of Rs 47 crore. For 6 months ending 30-09-07, the topline of the company was at Rs 502 crore with PAT of Rs 129 crore. With this kind of performance, the promoters of the company, are dreaming to mobilize close to Rs 6,464 crore, by diluting close to 10%. Really dreaming big.

If we compare its valuations, with other realty companies, it is nowhere matching with them. The per sq. ft. cost of land works out to Rs 1,097 per sq. ft. for the company, on expected market capitalization of Rs 62,114 crore. Parsvnath Developers has a market capitalization of Rs 5,000 crore with 220 million sq. ft. of saleable area, translating into a value of Rs 225 per sq. ft. Apart from this, Parsvnath Developers, has about 55% area in A Class cities, and 55% of this is in NCR region. Promoter’s stake is also quite high at 80% and company has presence in residential integrated township, shopping, commercial, hotels, SEZ and hospitality sector.

Parsvnath Developers with market capitalization of Rs 5,000 crore posted total income of Rs 488 crore and PAT of Rs 115 crore for quarter ending December 07. Omaxe with market capitalization of Rs 5,000 crore had posted a topline of Rs 576 crore with PAT of Rs 154 crore, for quarter ending December 07. Omaxe is developing 20 million sq. ft. in FY 08 and plans to develop 40 million sq. ft. in FY 09.

Unitech having market capitalization of Rs 61,000 crore is posting quarterly topline of over Rs 1,000 crore and bottomline of close to Rs 500 crore. DLF having market capitalization of close to Rs 1,40,000 crore had posted a topline of Rs 3,650 crore and PAT of Rs 2,145 crore, after paying tax of over Rs 320 crore, for December 07 quarter.

Inspite of losses in FY 07, and meager profit of Rs 132 crore in first half of FY 08, the company dared to capitalize Rs 760 crore, out of share premium, to issue bonus shares in the ratio of 7 shares for every 1 share held. This is inspite of the fact that more than 50% equity capital, (pre-bonus), were issued at par.

The company seems to be more building its brand image and visibility, based on the track record of Emaar, a Dubai based company. Even in Hyderabad, where the company is owning 510 acres of land, at its Boulder Hills project, has presently developed a 18 hole golf course on about 180 acres. Not a single sq. ft. of saleable area has been developed by company, as yet, on this project. So, who will come and play on this golf course? Probably, golf course would help the company in marketing its realty project. In the vicinity of Boulder Hills project, Lanco is selling residential premises at Rs 4,000 to Rs 4,500 per sq. ft. while company dreams of realizing Rs 6,500 to Rs 7,000 per sq. ft.

The issue has no positives at all to attract any prospective investor, in view of umpteen mid and large size realty companies being available in the secondary market. The financial performance, not likely to take off for FY 08 and FY 09 (part) would keep the share price depressed, as post listing, financial performance of the company would get compared with DLF and Unitech where company won’t be able to stand.

Give a pass to the issue and go for existing established players showing growth coupled with better margins and diversified range on pan-India basis.


Disclaimer : witter will have no obligation for the action done on the bases of this post.

Myself

hi guys..
this is ankur bansal..
the biggest noob of the millenuim..
i dont know ne thin bout share market..but still ppl ask for my advice..
i wish if i was intelligent..wat wud b the scene then..