Sunday, January 31, 2010


India’s largest power generation company, NTPC is entering the capital markets on February 3, 2010 with its follow-on public offer (FPO) of 412,273,220 equity shares of Rs 10 each, in the price band to be determined through competitive bidding process. The FPO will close on February 5, 2010.The offer marks a ‘divestment’ of 5% in NTPC by GOI. After the FPO, Govt holding will come down to 84.5% of Equity Share capital.

ICICI Securities Limited, Citigroup Global Markets India Private Limited, JP Morgan India Private Limited and Kotak Mahindra Capital Company Limited are the book running lead managers to the Offer.


NTPC is the largest power generating company in India. The owned, installed power generating capacity is approximately 18.6% of India's total installed capacity. In Fiscal 2009, the company contributed 28.6% of the total power generation of India. NTPC is the top IPP in Asia, and ranked second in the world, on the basis of asset worth, revenues, profits and return on invested capital, according to a study conducted by Platts, of the McGraw-Hill group. As of September 30, 2009, the total installed power generation capacity is 30,644 MW, including 28,350 MW of generation capacity through 112 units owned by NTPC and 2,294 MW of capacity through 2 joint venture companies. Of the owned capacity, 86.0% is coal-based, operated through 15 coal-based power stations, and 14.0% is gas-based, operated through seven gas-based power stations (including one naphtha-fired station). In the year 2009, NTPC generated 206.9 billion units of electricity through owned stations. NTPC operates through power stations at a level of efficiency that exceeds the average in India, based upon availability factor (which is a measure of how often a station is available to generate power) and average plant load factor (“PLF”) (which is a measure of how much of its capacity a plant actually uses to generate electricity). During 2008-09, the coal-based stations operated at an average availability factor of 92.5%, and achieved an average PLF of 91.1%, compared to the all-India average PLF for coal-based stations of 77.2%. Out of 15 coal-based power stations, four operated at a PLF of greater than 95.0% and one operated at a PLF of 99.4%. The gas-based stations operated at an average availability of 86.7% and an average PLF of 67.0%, compared to the all-India average PLF for gas-based stations of 57.6%.


The objects of the Offer are to carry out the divestment of 412,273,220 Equity Shares by the Selling Shareholder (Govt of India). NTPC will not receive any proceeds from the Offer and all proceeds shall go to the Selling Shareholder.


The company achieved a turn over of Rs 40017.70cr and Rs 45272.80cr for the years 08 and 09 respectively. Net profits after tax were Rs 7414.80cr and Rs 8201.30cr. The weighted average EPS for the above periods was Rs 9.63. The weighted average RoNW for the same period is 14.23. NAV as on 30-09-09 is Rs 75.01.


• The company is entering into new businesses – power trading /distribution, and to develop nuclear power stations.

• The company has formed joint ventures for the manufacture of equipment used in the power business. Prior to entering these joint ventures, NTPC was not engaged in manufacturing business. NTPC’s ability to succeed in the manufacturing business is to be seen.

• The State Electricity Boards (SEBs) and the state owned distribution companies are the largest purchasers of power from NTPC and currently account for more than 90% of sales of electricity. NTPC is obligated to supply power to them in accordance with the terms of the allocation letters issued by the GoI for each of the power stations. Historically, NTPC had significant problems in recoveries from SEBs.

• The success of NTPC’s operations, and the proposed expansion of generation capacity, will be dependent on, among other things, the company’s ability to ensure unconstrained availability of fuels at competitive prices during the life cycle of the existing and planned thermal power stations. Fuel represents the largest expense and the two primary fuels being coal and gas.

• NTPC faces competition because of deregulation in the Indian power sector.

• NTPC has executed a letter of intent with Reliance Industries Limited (“RIL”) for the purchase of gas, which if not declared as a valid and binding contract between NTPC and RIL, may negatively impact the financial results of operation.


• Leadership position in the Indian power sector.
• Strong cash flow.
• High operational efficiency of coal-based stations.
• Long-term agreements for coal and gas supply.
• Strategic locations near fuel source.
• Ability to turn around under-performing stations.
• Experienced in-house engineering capabilities.
• Advanced information technology platform.
• Strong balance sheet.
• Government support.


The share, currently, is quoting around Rs 215/- in the exchanges. Unless the offer price is substantially less than the market price, it does not make any sense to invest in the company’s shares. Invest if it is going to be priced at Rs 200/- or below. However, it is a good long-term bet.

Friday, January 29, 2010


ISSUE DETAILS: Public issue of 95, 74, 000 equity shares of Rs 10/- each, in the price band of Rs 40 -45.The company plans to raise Rs 42.00cr through the issue. Keynote Corporate Services are the sole BRLM to the issue. The issue opens for public on 01-02-2010 and closes on 03-02-2010.

PROMOTERS: Makrand Appalwar, Ms. Rinku Appalwar and Dr. Mitravinda Appalwar are the promoter of the Company.


The company is engaged in manufacture, sale of Flexible Intermediate Bulk Container (FIBC - Jumbo Bags), Woven Sacks, and various woven polymer based products like Container Liners, Protective irrigation system, Canal Liners, Flexi Tanks, Car covers etc. The manufacturing facility is located at Silvassa.


• Expansion in the present facility to increase the present installed capacity from 5,000 MTPA to 17,800 MTPA.

• Meet the working capital requirements of the Company.


The company achieved a turn over of Rs 22.91cr, 29.64cr and 38.27cr for the years 07, 08 and 09. The net profits for the above periods are 0.52cr, 0.54cr and 1.36cr respectively. The Weighted Average EPS for the above period is Rs 3.19.

• CARE has assigned an ‘IPO Grade 2′ rating, indicating below average fundamentals.

• The proposed project for which the funds are being raised has not been appraised by any Bank or Financial Institution and the fund requirements are based primarily on Management estimates.

• The company has not yet placed orders for plant & machinery and equipment requirements for our proposed project. Any delay in procurement of plant & machinery, equipment, etc. may affect the viability of the project.

• Primary raw materials are petroleum-based products - leading to higher susceptibility to price fluctuations Price volatility of raw materials (including plastic polymer) used for manufacturing may materially affect business prospects of the company.

• Introduction of alternative packaging materials caused by changes in technology or consumer habits may reduce demand for products and may adversely affect the profitability and business prospects

• The average cost of acquisition of the equity Shares of Rs. 10 each by the Promoter are as under:

Mr. Makrand Appalwar Rs. 4.00
Ms. Rinku Appalwar Rs. 4.00
Dr. Mitravinda Appalwar Rs. 4.00


India's per capita demand for polymers is still a minuscule 6 kg Vis a Vis world average of 27 kg. The growing domestic market as well as export will make India an interesting place for polymer business in the years to come. India has the advantage of a large population and hence expected to maintain high economic growth. This should propel the India’s consumption in polymer to new levels in coming year.

Packaging industry is a multitechnology, multi product, multi process industry encompassing various materials like polymers, chemicals, metals, paper etc. Consumer needs packaging to be protective, attractive and user friendly.

The competitiveness of a nation depends on how it balances economic development of sustainable growth and responsible care of the global environment in a borderless economy. It fully depends on the development of both environmentally sound manufacturing and effective recycling technologies for the products. These include 1) Energy conservation and technology of the Indian manufacturing industry, 2) Development of environmentally sound technology, 3) Effective products recycling technologies, and 4) Sustainable growth in the new chemical age.


At the upper band, the share is valued 13 times the weighted average earnings of FY 07, 08 and 09. The company’s track record of profitability is not so impressive. Considering the risks associated with the project, the valuation is on the high side.

RECOMMENDATIONS: Subscription to the issue does not qualify for recommendation.

Thursday, January 28, 2010



Public issue of equity shares of face value of Rs 10/- in the price band of Rs 468 – 486, aggregating up to Rs 1500cr. Enam Securities Private Limited and Kotak Mahindra Capital Company Limited are the Book Running Lead Managers. The Issue opens for public on 29 - 01 -10 and closes on 02 -02 -10.

PROMOTERS: Shahid U. Balwa, Neelkamal Tower Construction Private Limited and Vinod Goenka – (HUF), are the promoters of the Company.


Mumbai based real estate Development Company, focusing on residential, commercial, retail housing and cluster redevelopment. As on August 31, 2009, there are ten ongoing Projects, aggregating approximately to 18.61 million square feet of Saleable Area, nine Projects in pipeline, aggregating approximately to 20.17 million square feet of Saleable Area.

The residential portfolio currently covers projects catering to customers across all income groups. In the commercial portfolio, the company builds and sells customised office space as per the requirements of buyers. The other projects includes - development of mass housing for the local authority and generating transferable development rights (“TDRs”), cluster redevelopment of old and dilapidated structures.


1. To meet expenses of construction and development of certain projects;
2. To pre-pay the loan taken from IDFC.
3. For meeting expenses towards general corporate purposes.


For the fiscal year ended March 31, 2008 and the period from January 8, 2007 to March 31, 2007, the company reported net loss of Rs. 245.77 million and Rs. 6.34 million respectively. For the fiscal years ended March 31, 2009, the company reported total income of Rs 4644.31 million and net profit of Rs 1458.80 million.


1. Most of the operations are concentrated in and around Mumbai, and as a result, heavily dependent on the performance and the relative conditions affecting the real estate market in Mumbai. In the event of a regional slowdown in construction activity in Mumbai or the surrounding areas, or any developments that are likely to affect projects in and around Mumbai and make them less economically beneficial, has direct bearing on the performance of the company.

2. As at March 31, 2009, the company has lent interest free loans and advances amounting to Rs. 51.5 million, for which the company has not executed any agreements and remain unconfirmed. Any inability by these entities to repay these loans could adversely affect the financial condition.

3. The projects require the services of third parties including architects, engineers, contractors and suppliers of labour and materials. Third party subcontractors perform all the construction work for projects.

4. There are ventures which are promoted by the same Promoters and are engaged in a similar line of business.

5. Heavily indebted company.

6. The company has history of operating losses and negative cash flows in the past.

7. Some of the Subsidiaries and Group Companies (62) have incurred losses during recent financial years.

8. Restrictions on foreign direct investment (“FDI”) in the real estate sector may hamper the ability to raise additional capital, to fund projects on going basis.

9. The average cost of acquisition of Equity Shares by the Promoters are as follows:

Mr. Vinod K. Goenka Rs 2.34
Mr. Shahid U. Balwa Rs 0.48
Neelkamal Tower Construction Private Limited Rs 2.38
Vinod Goenka (HUF) Rs 2.36

10. The fund requirements are based on internal estimates of the management and have not been appraised by any bank or financial institution or any other independent agency.

11. A part of the issue proceeds (Rs 80.00cr) is being utilized for repayment loan.

12. Rating agency CRISIL has awarded grade -2 for the IPO, indicating below average fundamentals.

VALUATION: The company has very limited period of business history. Comparing the performance of one financial year with listed realty majors is not appropriate. For a company with a short financial track record of just an year, the premium sought is on a high side. Investor is not likely to see any gains.

RECOMMENDATIONS: The issue is very aggressively priced. Investors may stay away from the issue.

Tuesday, January 26, 2010


Thangamayil Jewellery Ltd. (TJL) is one of the leading jewellery retailers in Madurai and trades in Gold Jewellery, Diamond and Platinum jewels. The IPO opens for subscription on January 27, 2010 and closes on January 29, 2010, in the price band of Rs 70 -75. BRLM – Keynote Corporate Services Limited.

The company presently has jewellery showrooms in Rajapalayam, Karaikudi and Ramanathapuram.


TJL is raising funds to expand existing business by establishing retail outlets at Tuticorin, Dindigul, Theni, Nagercoil, Tirunelveli, Kovilpatti and Sivakasi and to renovate the existing outlet at Madurai and to meet the working capital requirements.


The operating income increased from Rs 224.5 crores in FY08 to Rs 246.83 crores in FY09. The net profit after tax (PAT) has increased marginally from Rs 5.61 crores FY08 to Rs 7.5 crores in FY09.


a. The company had negative cash flow during the last three years.
b. Rating agency Brickworks has awarded grade three for IPO indicating average fundamentals.
c. Limited geographical reach.
d. High price volatility of gold in international markets.
e. Low margin.
f. The proposed expansion project (Rs 48cr) has not been appraised by any Bank/FI.

VALUATION: In the price band of Rs 70 – 75, the valuations are at 6 times the estimated earnings of FY -10, on post issue equity. Net asset value as on 31-03-09 is Rs 32.90. The issue is very attractively priced.

RECOMMENDATIONS: Apply. There is enough scope for further appreciation


ISSUE DETAILS: Public issue of shares of Rs 10/- each in the price band of Rs 220 -230. Total amount intended to be raised Rs150.00cr. BRLM - Saffron Capital Advisors Private Limited and Centrum Capital Limited. Issue opens on 25-01-10 and closes 28 -01-10.

BUSINESS: The company is engaged in providing logistics services. However, much of its revenue comes from one segment – freight services.

FINANCIALS: 05 06 07 08 09 (Rs in millions)

Income 599.82 957.21 4,306.11 10,940.92 21,405.24

Profit (4.93) (86.28) 281.03 562.76 983.80


a. The company had negative cash flow in the last five years.
b. Brickwork rating agency has awarded grade -3 for the IPO, indicating average fundamentals.
c. The project (Rs 150.00cr) has not been appraised by any Bank/FI. Funds requirement and utilization is entirely left to the discretion of the company.
d. There are no definitive plans for acquisition, where in the company intends to invest around Rs 35.00cr.
e. The company depends upon third parties to provide equipment and services. This may result in delays in delivering the cargo/service on time, which inturn may lead to customer dissatisfaction and loss of further business.

f.Company faces very stiff competition from established multinational players.

VALUATION: At the upper price band, the share is priced about 26 times the company’s likely earnings of FY -10. The valuation is too much stressed, considering its negative cash flow and business model.

RECOMMENDATIONS: Investors are advised to keep away from the issue.


ISSUE DETAILS: Public issue of 75, 00, 000 shares of Rs 10 each in the price band of Rs 65 – 75. BRLM – Charted Capital and Investments limited. Issue opens on 27-01-10 and closes on 29-01-10.

BUSINESS: The company is engaged in the manufacture and marketing of pharmaceutical formulations in the domestic market. The company also undertakes contract manufacturing for various domestic companies.

OBJECT OF THE ISSUE: To set up new manufacturing facilities in SEZ area in Indore.The project has not been appraised by any Bank /FI.

RISKS: The Company operates in a very highly competitive industry/market. Not much experience in manufacturing operations. The longer debtors’ relaisation indicates relatively less bargaining power and consequent strain on cash flow.

VALUATION: At the price band of Rs65-75, the offer is priced around 25 times its likely FY10 earnings. This appears to be on the very high side, considering that many top pharmaceutical companies with better earnings and business prospects are available at much lower valuation.

RECOMMENDATIONS: The issue is very aggressively priced, considering its past performance and future business prospects. Investors advised to stay away from the issue.

Sunday, January 24, 2010


Pune-based, engineering procurement and construction (EPC) services and real estate development company is entering the capital markets with an IPO of 1, 08, 00,000 equity shares of Rs 10/- each in the price band of Rs 165 – 185, through book-building process. Kotak Mahindra Capital Company Limited and Enam Securities private limited are the Book Running Lead Managers. The issue will open on 27-01-10 and closes on 29 -01 -10. .

The Company commenced business as an EPC services company in 1986 and have since, due to synergies between the two businesses diversified into the real estate business as well. As a result, the company currently has two main revenue streams.
VEL’s real estate business comprises construction of residential and office complexes, along with IT parks, industrial units, shopping malls, multiplexes, educational institutions and hotels. As of August 2009, the company had completed 41projects worth Rs 880rc, out of which Rs 640cr was for third parties. In 2008-09, the construction business contributed around 93 per cent to the company’s total revenues. VEL follows a joint development strategy, wherein the landowner brings in the land, while VEL provides the construction expertise. The company has two wholly owned budget hotels in Goa and a three-star service apartment in Pune. VEL has 59 ongoing EPC Contracts, with an estimated total contract value of Rs. 3,378.87cr as on the same date. Some of major EPC clients include well-known companies such as Cipla Limited, Emcure pharmaceuticals Limited, Zensar Technologies Limited, Kirloskar Brothers Limited and Okasa Pharma Private Limited.


The objects of the Issue are to raise funds for (a) construction of EPC contracts and real estate development projects (b) repayment of debt (c) general corporate purposes. The company intends to utilise around Rs 40cr for repayment of loan


In 2008-09, the company reported a net profit of Rs 24.9 cr on a turnover of Rs 509.30 cr, translating into a net margin of 4.9 per cent and EPS of Rs 3.3.The book value stood at Rs 55.2. CRISIL has awarded grade -3 indicating average fundamentals.


The real estate industry is undergoing a significant downturn, if continued for longer period, may adversely affect demand for EPC services business. The company depends heavily on third party contracts.

The projects are generally performed on a fixed-price range basis, except in certain projects where price variations are allowed. Unanticipated costs or delays in performance of a part of the contract can have compounding effects by increasing costs of other parts of the contract and on the bottom line.


At the offer price band of Rs 165 -185, the stock is priced at 50 times of its FY -09 EPS and around 35 times the earnings of FY –10. The issue is very irrationally priced. The best performing stocks in the industry are available for PE less than 20. AVOID SUBSCRIPTION.

Thursday, January 14, 2010


The food service company, which runs Domino’s operations in India, the largest pizza chain, is entering the capital market to raise around Rs 300cr through IPO.

The offer comprises of fresh issue of 40,00,000 equity shares and an offer for sale of 18,670,447 equity shares in the price band of Rs 135 -145. Post issue promoter holding will be 62.19% of diluted equity.

Kotak Mahindra Capital Company are the BRLM and the issue will open on 18-01-10 and closes on 20-01-10.

Domino's operates around 274 stores in India and about 5 outlets in Sri Lanka. They have recently renewed their contract with master franchise controller Domino's International. The new contract is for 15 years, it gives them exclusive rights for operations in India, Nepal, Sri Lanka and Bangladesh. The company plans to open 25 stores in 2011 and 2012.

As per Food Franchising Report 2009, Domino’s pizza is the largest and fastest growing international food brands in South Asia and the market leader in the organised pizza home delivery segment in India with over 65% market share.

The Quick Service advantage

• High speed of service and efficiency: Quick service restaurants typically have order taking and cooking platforms designed specifically to order, prepare and serve menu items with speed and efficiency. Fast and consistent food service is a characteristic of quick service restaurants.

• Convenience: Quick service restaurants are typically located in places that are easily accessed and convenient to customers’ homes, places of work and commuter routes.

• Limited menu choice and service: The menus at most quick service restaurants have a limited number of standardized items. Typically, customers order at a counter or drive through and pick up food that then is taken to a seating area or consumed off the restaurant premises.

• Value prices: At quick service restaurants, average check amounts are generally lower than other major segments of the restaurant industry.


The main objects appear to provide an exit route to group of investors - India Private Equity Fund (Mauritius), Ind ocean Pizza Holding Limited, and repayment of loans and for general corporate purposes.


The company reported a turn over of Rs 148.41cr, 226.34 cr, and Rs 301.77 cr for the years 07, 08 and 09 respectively. The EPS for the same years is 0.96, 1.38, and 1.16 respectively. The company has carried forward loss of Rs 74.40cr as on 31-03-09. The net asset value as on the same date is Rs 3.92. The company has not distributed any dividend in the past.


Although Jubilant are exclusive franchisee of a globally successful brand, known for operational excellence and robust supply chain management, the premium sought appears to be on the very high side considering its lackluster financial performance.


The Master Franchise Agreement confers certain rights on Domino’s International and requires Jubilant to seek the approval of Domino’s International in certain circumstances including choosing suppliers to open any store. Jubilant lacks operational freedom.

Jubilant faces stiff competition from organized and as well un organized sector. The going for the company may not be easy in Nepal, Bangladesh and SriLanka,where the company intends to expand its operations.

Fast Food is not at all conducive towards maintaining a balanced diet and an increased consumption of the same is linked to serious health hazards like obesity and development of chronic diseases. Fast food contradictorily has a popular taste, as it is high in fat and sugar content. Due to the addition of preservatives, these types of foods also have typically high sodium content.


The brand name is exciting but the fundamentals and business prospects are not so. It will take couple of years, for the company, to completely wipe out the losses and come to dividend list. Ultimately, the company’s business prospects and bottom line that determines the share price movement in the stock market and not the brand equity alone. The issue is very aggressively priced. Avoid subscription.

Monday, January 11, 2010


The Yash Birla group, Mumbai based, BSE listed Birla Shloka Edutec has come up with follow on offer to fund its expansion plans. The company proposes to raise Rs 34.80 cr by issue of equity shares of Rs 10/- each in the price band of Rs 45-50. Issue opens on 11-01-10 and closes on 13-01-10. Ashika Capital Limited are the Book Running Lead Manager.

The group has diversified interest in industries, among others, steel pipes, machine tools, property development, cotton ginning etc. The major companies in the group include Zenith Birla (India) Ltd, Birla Power Solutions Ltd, Dagger Forst Tools Ltd, Birla Precision Technologies Ltd , Birla Transasia Carpets Ltd, Birla Perucchini Ltd, Birla Electricals Ltd, Birla Lifestyle Ltd, Birla Concepts (India) Pvt. Ltd,

Birla Shloka operates in education sector. It provides multimedia based educational products to governments and private institutions in the country. The company has very limited presence in the sector. The company has bid for the contract floated by Maharastra and Madya Pradesh governments.


The funds raised are intended to be utilized for Turnkey projects to be executed by the company under the BOOT model, for up gradation of infrastructure and content development for XL@School (an audiovisual soft ware product) and for working capital requirement.


The company reported a turn over of Rs 39.17cr and Rs 104.00 cr for the years 07-08 and 08-09 respectively. The net profit earned were Rs0.38cr and Rs0.31cr for the above periods. Major portion of the revenue has come from trading in computer hardware and soft ware and hence the margins are very low.


1.The company had negative cash flow in the last five years.
2.Birla Bombay Limited –one of the group companies appears in the RBI defaulters list.
3.Book value of share as on 31-03-09 is Rs 11.75.
4.Not so impressive performance of listed companies of the group in the Stock Exchanges.

Education is a priority sector for the government and lot of reforms are expected in the coming days. There are plenty of opportunities for the companies with right business model.


Considering the un impressive track record of this company and that of group companies as well, investors are advised to stay away from the issue.

Sunday, January 10, 2010


The Bengaluru based, IT service provider is entering the capital markets with initial public offer of 1,15,03,000 equity shares of Rs 10 each, consisting of fresh issue of 57,33,600 shares and offer for sale of 57,69,400 shares in the price band of Rs 155 – 165. The issue will open on 11-01-10 and closes on 13-01-10. The issue would constitute 26.17% 0f the post issue paid up capital. SPA Merchant Bankers limited and IIFL are the BRLMs.

The company is promoted by Sanjay Govil and associates. Infinite derives major portion of its revenue from Telecom and Health care sectors. The company has global presence and has been increasing the geographical footprint in an aggressive manner. Infinite has established presence in most of the large Telecom & IT Services markets of the World with offices in the U.S. UK, India, Singapore, Malaysia and China. The company has three development centers in India - in Bangalore, Chennai & Hyderabad. The company’s main campus is located in Whitefield, Bangalore, in an area of approx. 4.48 acres. The key clients of Infinite include Verizon, IBM, GE, AOL, ACS and Alcatel Lucent.


The company intends to utilize the issue proceeds, among others, for acquisitions and expansion of facilities at Gurgoan. However, the project has not been appraised by any Bank/ Financial Institutions.


For the year 2008-09, the company reported a net profit of Rs 457 million on a turnover of Rs 4,900 million, translating to a net margin of 9.3 per cent. It posted an EPS of Rs 11.96 during the same period, while its book value per share stood at Rs 29.10. Infinite’s return on capital employed (ROCE) and return on equity (ROE) for the year stood at 48.0 per cent and 50.5 per cent, respectively.

The EPS for FY10E on post-IPO fully diluted equity works out to Rs 16. At the offer price band of Rs 155-165, the IPO is available at almost 10x the upper price band of its FY10E annualized post-issue EPS. The stock is reasonably priced from a valuation perspective.


The Company operates in business environment, which is highly competitive with a number of strong players operating in India and overseas. The challenges lies in effectively competing with these global players. The dependence on US, which contributes nearly 90 per cent of the company’s revenues, is a matter for concern.

Infinite derives major portion its revenue from two verticals –Telecom and Health care and top five clients constitute 80 per cent of revenues. These are the two sectors, which are expected to have exponential growth in the coming decade, both in developing countries and as well in developed countries. Having established credibility with the leaders in these sectors one can expect these verticals to contribute significantly to the revenue and as well as to the bottom-line. The health care reforms Bill in US is likely to be cleared in the coming days, which will benefit companies providing low-cost services, like Infinite.


The issue is attractively priced and there is enough scope for further appreciation. APPLY.