Sunday, November 15, 2009

IPO ANALYSIS: COX & KINGS: ATTRACTIVELY PRICED – APPLY

One of the leading and oldest recognised service provider in the travel and tourism industry with pan India and global presence in 18 countries is planning to raise around Rs 600 crore through IPO. The company proposes to issue 1,84, 96,640-equity shares of Rs 10/ each, including offer for sale of 30, 46,640 shares in the price band of Rs 316 -330/ share. The issue is slated to open on 18-11-09 and closes on 20-11-09. India Info line limited are the Book Running Lead Manager.

The company caters to the overall travel needs of an Indian and International traveller and it is one of the India’s largest tour and travel operator, which serve as a ‘One Stop Shop’ for all travel and travel related products.

Cox & Kings business are broadly categorised as Leisure Travel, Corporate Travel, Forex and Visa Processing. They also design travel packages for both individuals and groups for their domestic and international leisure travel, as travel arrangements for corporate clients to cater to their business meetings, conferences and events. They also provide end-to-end travel solutions including land, air and cruise bookings, hotel bookings, in-transit arrangements, local sightseeing, visa, passport and medical insurance assistance. The company continuously innovates product offerings with the flexibility to meet the changing needs of the customers and to address their needs better.

OBJECTS OF THE ISSUE

The proceeds of the IPO are intended to be deployed for acquisitions, investments in overseas subsidiaries, repayment of loans and for general corporate purposes.

THE PRICING

Taking into consideration the company’s strong brand equity, efficient management, wide range of products, geographical reach, investment in technology and financial performances, the issue can be considered very attractively priced. The rating agency CARE has assigned Grade 4, indicating above average fundamentals. At Rs 316-330, the price-to-earning ratio is around 16 multiple based on the average weighted EPS of Rs 22.00 for the last three years, as against the average industry PE multiple of 36. There is enough scope for further appreciation.

CHALLENGES

The company operates in a highly competitive market and hence faces stiff competition from other players operating in this sector as also from the un-organized sectors. Many Indian and foreign players have entered the market both in the online and offline space. Pricing is one of the key factors that play an important role in customers’ selection of products. There are several strategies adopted by competitors to increase their market share through advertising, pricing, service, new product innovations and distribution reach amongst others. This increased competition by both traditional and new players is likely to affect margins. However, this could stand mitigated by the the brand equity and the trust it has earned over the years. The company appears well poised to face the challenges and emerge a winner. This is one of the public issues that the investors can apply and look for positive returns.

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