IPO ANALYSIS: GUJARAT STATE PETROLEUM CORPORATION LIMITED (GSPC) – ENERGY FOR GROWTH - INVEST

GSPC - one of the leading oil and gas exploration and the largest gas trading company in the country, is entering the capital markets with an IPO. The company proposes to issue 4, 48,000,000 equity shares of Rs 1 FV in the likely price band of Rs 80-90/- The company intends to raise around Rs 3000cr from the market.

JM Financial Consultants, Enam Securities, ICICI Securities, Kotak Mahindra Capital Company and SBI Capital Markets Limited are the BRLMs.

BUSINESS

GSPC, an undertaking of the Government of Gujarat, is an integrated energy company – comprising exploration and production, Gas transmission, Distribution and Power generation with presence across the entire natural gas value chain. 

GSPC is a mid-sized oil and gas exploration and production (E&P) company.   The company holds a large portfolio of E&P assets, which are in various stages of exploration, development and production.  GPSC has 60 onshore and offshore oil and gas blocks.  GSPC has 28 oil & gas discoveries in the Cambay & K G basins as on 31-12-09.

GSPC’s primary asset is the Deen Dayal field in the Krishna-Godavari basin (the KG basin) located off the east coast of the State of Andhra Pradesh, which has significant gas reserves.

 

• Ranked third in India as an operator for number of discoveries.
• Owns and operates the largest gas transmission network in Gujarat.
• Developing gas based power plants in Gujarat with an expected aggregate generation capacity of 1209MW ( 156MW is already operational)
• Developing 5 MMTPA LNG Terminal at Mundra in Gujarat.
• One of the largest gas trading companies in the country.

OBJECTS:

1.  To part finance the Deen Dayal West field in the KG basin.

2.  Pre-pay rupee loan facility.

3.  To fund exploration and development costs for Fiscal 2011 in certain blocks. 

FINANCIALS:

The company’s total revenues stood at Rs 26.4 bn for the six months ended September 2009 as against Rs 62.0 bn in FY09 and Rs 46.3 bn in FY08.  For the six months ended September 2009, the company’s operating margins were higher at 29.5 per cent as compared to 21.5 per cent in FY09. The improvement in operating margins was because of increase in contribution to GSPC’s top-line from transmission and CGD (city gas distribution) businesses, which are high margin businesses.

Domestic Supply and Demand

Domestic consumption of oil has grown at CAGR of 6.8% since the financial year 2003.  The  domestic  production  of  oil  remained  stagnant,  higher  refining  capacity additions saw crude  out put  increase at a CAGR of 9.1% from  the  financial year 1998  to 2009. This  increased India‘s dependence on  imports  from 48.0% of  its  total oil  requirement  in  the  financial year 1998  to around 80%  in  the financial year 2009. Domestic production is, however, expected to increase in the short term as production from the Mangala basin, which commenced production in August 2009, ramps up to expected peak production of 8.8 MMT annually in 2011 according to CRISIL report. 

On the supply front, GSPC has tied up with GAIL (India) Ltd, Indian Oil Corporation Ltd and Bharat Petroleum, Corporation Ltd for supply of Liquefied Natural Gas (LNG) on long-term contract basis and with Hazira LNG Pvt. Ltd. for the supply of spot-LNG.

GSPC is present in the gas transmission business through its subsidiary Gujarat State Petronet Limited (GSPL). Gujarat has a strong industrial base and a widespread gas transmission network. This has resulted in Gujarat to emerge as the highest gas consuming state in India. This uniquely places GSPL to attract a large portion of the incremental supply of gas in the medium term. Bearing testimony to this, nearly 30-35 percent of the 60-mmscmd of RIL’s current KG basin gas production is being supplied to Gujarat. 

RISKS

The  start  of  production  from  the Deen Dayal West  field  in  the KG  basin,  off  the  east  coast  of  India, entails various risks, and the occurrence of any such risk may result in significant cost overruns or delay the  commencement  of  commercial  production,  which  may  have  an  adverse  effect  the  business.

VALUATION:

·         Excellent business prospects from exploration and production.

·         Gas trading to contribute volumes.

·         CGD to contribute towards better margin.

·          Presence in one of the fastest growing industrial state in the country.

·         Scope for further margin improvement.

RECOMMENDATIONS:

CRISIL has awarded grade - 4 for the IPO indicating above average fundamentals.

Energy filled issue. Subscribe at the lower price band.

STAN CHART IDR SUBSCRIBED 2.20 TIMES

The first ever IDR has been subscribed by 2.20 times. Today was the last day for subscription. The issue, which had received lukewarm response in the first three days managed to get good subscription in the last day. Considering the size of issue and the new SEBI guide lines which came into force from 01-05-10, the subscription received by the Stan Chart IDR is commendable.

STAN CHART IDR LUKE - WARM RESPONSE

The response to the first ever IDR issue has been very luke-warm so far. The issue been subscribed only to the extent of 10%,at the end of the second day.
The issue opened on 25-05-10 closes on 28-05-10. The IDR has been offered in the price band of Rs 100-115. Retail investors are offered 5% discount. FIRST CHOICE RECOMMENDS FOR SUBSCRIPTION TO THE ISSUE AT THE LOWER PRICE BAND. SEARCH THIS BLOG FOR DETAILED ANALYSIS.

FORTHCOMING IPO - ONE 97 COMMUNICATIONS FILES DRHP

NAME OF THE COMPANY	ONE97 COMMUNICATIONS LIMITED
BUSINESS	Provider of telecommunications value added services to telecom sectors.
ISSUE SIZE	-
PROMOTERS	VIJAY SHEKHAR SHARMA
BRLM	IDFC, AVENDUS CAPITAL
OBJECTS	Procuring telecom equipments and for software  installation.

STAN CHART IDR PRICE BAND RS 100-115. INVEST AT LOWER BAND.

The price band for the first ever IDR has been fixed, at Rs 100-115 per share. The retail investors are eligible for 5% discount. APPLY at lower price band. Search this blog for detailed IDR analysis.

IPO ANALYSIS: FIRST CHOICE, RIGHT CHOICE

In the last week of April, six companies rushed to the market with IPO, to escape new SEBI guide lines which came in to effect from 1-May-2010. 

Nitesh Estates limited offered shares at Rs 54/- now quoting at Rs 38/- almost 30% down.


Next was Tarapur Transformers. The shares were issued at Rs 75/- now  44% down quoting at Rs42/-.

Then came the big ticket IPO  - JayPee infra. The shares were offered at Rs 102. On the listing day itself the shares were down more than 10% from the issue price.


FIRST CHOICE HAD RECOMMENDED TO STAY AWAY FROM THE ABOVE ISSUES. RIGHT CALL. EVERY TIME.

 Mandhana Industries and SJVN Limited's IPOs were recommended for subscription. Both are trading above the offer price. (SJVNL - taking discount offered in to account).

TARA HEALTH FOODS - First choice had recommended to keep 100 km distance. The issue bombed.


AGAIN THE CALLS WERE CORRECT.  THEN, WHY SEARCH ELSE WHERE FOR IPO ANALYSIS. 

IPO NEWS: NEGATIVE LISTING, NEGATIVE CLOSING FOR JAYPEE INFRA

Jaypee Infra shares were listed in the exchanges. As against the issue price of Rs102/- (lower price band) the shares were listed below offer price and closed at RS 92.20, almost 10% down from the issue price.

FIRSTCHOICE HAD RECOMMENDED TO STAY AWAY FROM THE ISSUE, CONSIDERING THE HIGH PREMIUM. AGAIN THE ANALYSIS AND RECOMMENDATIONS PROVED CORRECT.

SEDATE LISTING FOR SJVNL

The state-run hydropower generator's were listed in the exchanges today.  Satluj Jal Vidyut Nigam Limited (SJVNL) had issued 41, 08, 81,400-equity shares of face value of RS 10 each, in the upper price band of Rs 26. The retail investors were offered a discount of 5 %. As against this price the share were listed at Rs 27.10 and closed at Rs 25.00. At the current level the share offers a good investment opportunity for both medium and long term.The government stake has come down to 90 percent of the total issued and paid up capital of 410, 88,14,000 Equity Shares of Rs. 10 each.

FORTH COMING IPOS - CRISIL GRADING

Hindustan Media Ventures Limited	IPO Grade 4/5
Gujarat State Petroleum Corporation	IPO Grade 4/5
Gujarat Pipavav Port Ltd.	IPO Grade 4/5
Oberoi Realty Ltd.	IPO Grade 4/5

IPOs THAT HIT THE MARKET IN APRIL 2010 AND THE CURRENT PRICE

NAME OF THE COMPANY	RECOMMENDATIONS OF FIRST CHOICE	CURRENT PRICE
TALWALKARS	AVOID	ABOVE ISSUE PRICE
NITESH ESTATES	AVOID	BELOW ISSUE PRICE
TARAPUR TRANSFORMERS	AVOID	BELOW ISSUE PRICE
MANDHANA INDUSTRIES	APPLY	ABOVE ISSUE PRICE

IPO NEWS - MANDHANA INDUSTRIES LIMITED LISTS AT PREMIUM

The Maharashtra based textile/garment manufacturer and exporter's share were listed in the exchanges. The company had issued 83, 00,000 shares of Rs 10/- each in the upper price band of Rs 130. As against the issue price, the shares were closed at Rs 133, after touching intra day high of Rs 139.50. Edelweiss Capital Limited and Axis Bank Limited were the BRLM to the IPO.

FIRST CHOICE HAD RECOMMENDED FOR SUBSCRIPTION TO THE ISSUE.

IDR ANALYSIS: STANDARD CHARTERED PLC: INVEST

The first-ever Indian Depository Receipts (IDR) issue to be launched by the UK-based Standard Chartered Bank opens on May 25, offering a 5 per cent discount to retail investors. The price band will be announced on May 24. The price of Standard Chartered PLC's Indian Depository Receipts (IDRs) will be fixed around the London stock price of the bank's stock, which currently hovers around £17 a share (Rs 1,140). Stan Chart intends to issue 22cr IDRs in the price band to be announced.

Taking into account the average share price of the bank on the LSE and assuming that the IDR is at par with the international market price, one IDR will be priced around Rs 100-114, since 10 IDRs constitute one share of Standard Chartered.

                    

JM Financial Consultants DSP Merrill Lynch, Kotak Mahindra Capital Company and SBI Capital Markets Limited are the BRLMs.

UBS Securities India and Goldman Sachs (India) Securities are the global co-coordinators.

Background

The Company was incorporated in 1969 pursuant to merger of The Chartered Bank and The Standard Bank Limited. Both banks were established in the mid-nineteenth century and their origins lie in financing trade in the emerging markets of Asia and Africa. The Chartered Bank opened its first branches in Mumbai, Kolkata and Shanghai in 1858, followed by Hong Kong in 1859 and was given a licence to issue Hong Kong bank notes in 1862. The Company’s Shares and preference shares are listed on the Official List and traded on the London Stock Exchange.

The Company operates through a number of subsidiaries including SCB, one of the leading international banking and financial services company. SCB particularly focuses on the markets of Asia, Africa and the Middle East.

Performance

For the last calendar year, StanChart had reported a 13% rise in profits to $5.1 billion, driven by rising profits from Indian operations. The profit from Indian operations for the first time crossed the $1-billion mark to $1.06 billion for the year ended 2009 from $891 million a year ago. Profits were driven by a sharp rise in the corporate banking profit.

The Company has no significant operations or assets other than its100 percentage interest in SCB. As at 31 December 2009, the Group has approximately 1,700 branches and outlets in more than 70 countries. As on the same date, the Group employed over 75,000 employees worldwide. The Group has significant operations in the Asia region, which accounted for over 75% of its US$5,151 million total profit before taxation for the year ended 31 December 2009.

The average RONW in the last three years is 15% and the net asset value as on 31-12-09 is Rs 630.00.

RISKS ASSOCIATED WITH IDRS

IDR Holders are required to pay a fixed fee of US$0.05 or less (exchanged into INR at prevailing exchange rates) per Share evidenced by IDRs upon a withdrawal of the Shares from the IDR.

IDR holders have to pay capital gains tax on the income earned through sale of shares. The long-term capital gains on sale of IDRs will be subject to tax at the rate of 20 per cent, plus applicable surcharge and education cess.

The legal regime in respect of the issuance of IDRs has only been recently introduced and its efficacy and efficiency is yet to be established in operations.

OTHER RISKS

The Group operates in over 70 countries and territories and is affected by the prevailing economic conditions in each market.  The Group operates primarily in Asia, Africa and the Middle East, and these operations expose it to risks arising from the political and economic environment of markets in these areas that could adversely affect its operations.

RECOMMENDATIONS

Investment in the IDR may be considered at the lower price band. The retail investors are eligible for 5% discount. The initial listing price is largely dependent on the stocks movement in the London Stock Exchange, where the company’s equity shares are listed. Hence, there will not be phenomenal listing gains for IDRs. The IDRs are likely to list at a decent premium to the issue price.

CAUTION: Investment decision can be taken only after fully understanding the concept of issue of IDRs.

TARAPUR TRANSFORMERS LISTS AT DISCOUNT

BilPower company promoted, transformer manufacturer's shares were listed in the exchanges.The company had issued 85, 00,000 shares of Rs10/- each in the upper price band of Rs 75. The issue opened on 26-04-10 and closed on 28-04-10. The shares were closed at a discount of 26.43%, at Rs 55.20. Comfort Securities Private Limited were the sole BRLM.

FIRST CHOICE HAD RECOMMENDED TO AVOID THE IPO,IN VIEW OF ITS POOR FUNDAMENTALS AND IRRATIONAL PRICING.

IPO LISTINGS FOR THE WEEK

The following IPOs are slated to list this week.

1. Tarapur Transformers Limited -- 18-05-10
2. Mandhana Industries Limited  --  19-05-10
3. SJVN Limited                        --  20-05-10   
4. Jay Pee Infra                          --  21-05-10  

FORTHCOMING IPO - GREATSHIP (INDIA) LIMITED

Issue size	22,050,875 equity shares,
Face value	Rs 10
Promoters	THE GREAT EASTERN SHIPPING COMPANY LIMITED
BRLMs	KOTAK MAHINDRA, DSP MERRILL LYNCH
Objects	Funding the acquisition, for redemption of part of the Preference Shares, funding the repayment of a portion of the debt

STANDARD CHARTS IDR TO OPEN ON 25-05-10

Standard Chartered Plc intends to raise up to $750 million through the first-ever issue of Indian depository receipts (IDRs), that will open on May 25.  The issue, comprising 240 million depository receipts,  may offer 5% discount to retail investors, price likely around Rs 110.

JM Financial Consultants, DSP Merrill Lynch, Kotak Mahindra Capital  are the BRLMs.

UBS Securities and Goldman Sachs are the global coordinators.

AWAIT FOR DETAILED ANALYSIS.

NEGATIVE CLOSING FOR NITESH ESTATES LIMITED

The Bengaluru based real estate company's were listed in the exchanges today. The 405cr IPO, in the price band of Rs 54-56, got very poor response from the retail investors. As against the issue price of Rs 54 (lower price band), the share was closed at Rs 51.20 at NSE.

ICICI Securities Limited, Enam Securities Private Limited and Kotak Mahindra Capital Company limited were the BRLM s.

FIRST CHOICE HAD RECOMMENDED TO STAY AWAY FROM THE ISSUE.

FORTHCOMING IPO - CANTABIL RETAIL LIMITED

The New Delhi based apparel manufacturer plans to raise around Rs 100cr, through IPO. The company, promoted by Vijay Bansal and Deepak Bansal, plans to utilise the proceeds of the IPO to set up a manufacturing unit in Harayana and for expansion of retail business. The issue is likely to hit the market in couple of weeks.

IPO NEWS -TARA HEALTH FOODS BOMBS

The IPO of Tara Health Foods Limited failed to receive the mandatory 90% subscription, in spite of reducing the price band and extending the issue by few days.

The company could muster subscription only to the extent of 60% of the shares offered.

FIRST CHOICE HAD RECOMMENDED TO STAY AWAY FROM THE ISSUE, BECAUSE OF ITS IRRATIONAL PRICING.

IPO NEWS – TECPRO SYSTEMS LIMITED

BUSINESS	TURN KEY SOLUTION FOR MATERIAL HANDLING
ISSUE SIZE	75,50,000 SHARES
FACE VALUE	RS 10
ISSUE %	14.56% POST ISSUE CAPITAL
BRLMS	SBI CAPS, KOTAK MAHINDRA

IPO ANALYSIS: H T MEDIA VENTURES LIMITED – SOARING CIRCULATION, STRONG BRAND EQUITY - INVEST

HT Media Ventures Limited, is one of  the  leading  print media house , which publishes, among others, ‘Hindustan‘,  the  third  largest  daily  newspaper  in  India,  in  terms  of Readership,  with  a  Readership  of  9.3  million  readers.  ‘Hindustan‘  began publication in 1936, during freedom movement and has been  one  of  India‘s  eminent Hindi  newspaper  dailies  for  over  70  years.  ‘Hindustan‘  has  the  largest Readership in key Hindi-speaking markets of Bihar and Jharkhand, with a strong and growing presence in Delhi NCR and the states of Uttar Pradesh and Uttarakhand. It is one of the fastest growing Hindi daily newspapers in India.

‘Hindustan‘is presently printed at 16 locations in the states/regions of Uttar Pradesh, Bihar, Jharkhand, Uttarakhand, Punjab and Delhi NCR. The distribution of newspapers takes place through a multi-tiered network of agents and vendors. 

HT Media Ventures  also  publishes  two Hindi magazines,  ‘Nandan‘,  a  children‘s magazine,  and  ‘Kadambini‘,  a  general interest  magazine.  The company also operates the website, www.livehindustan.com, which focuses on providing news in Hindi with regional content.

ISSUE DETAILS:

ISSUE OPENS/CLOSE ON	05-07-10 / 07-07-10
ISSUE SIZE/FV	RS 300 CR/ RS 10
PRICE BAND	YET TO BE DECIDED
BRLMS	EDELWEISS,KOTAK MAHINDRA
PROMOTERS	H T MEDIA LIMITED

  

FINANCIALS - RS IN CRORES

	08	09	31-12-09
REVENUE	16.85	17.73	52.14
NET PROFIT	0.28	0.19	3.57
EPS	0.70	0.28	5.11
RONW	2.54%	1.74%	21%

OBJECTS:

The objects of the Issue are to raise funds for (1) setting up new publishing units (Rs 66cr) (2) upgrading existing plant and machinery (Rs 55cr) (3) prepayment of loans (Rs153cr)

CHALLENGES:

The  Indian  newspaper  and  magazine  industry,  particularly  the  Hindi  newspaper  and  magazine industry,  is  intensely competitive.  In each of the markets, the company faces competition primarily from other newspapers and magazines for circulation, readership and advertising.  In  addition,  there is competition  from  other  alternative  forms  of  media  including,  but  not  limited  to,  television broadcasters,  magazines,  pamphlets,  flyers,  radio  broadcasters  and  internet  websites.  These other forms of media compete with newspapers for advertisers and for the time and attention of the readers. Ad-spend  by  the  advertisers  and  the  ability  to  attract  new  advertisers  is  influenced  largely  by  the circulation and  readership,  the geographical  reach,  readership demographics of the newspapers  and the preference of advertisers  for one media over another.  Pricing in the short term may be affected by the Circulation of the newspapers and magazines among the readers which is an important source of revenue for the  Company  since  its  derives  significant  revenues  from  subscriptions  and  sales.  In addition, circulation and readership significantly influence ad-spend by advertisers and the advertising rates in the newspapers. Circulation and readership is dependant on the quality and reach of the publications and the loyalty of the existing readers. Circulation  in  the  Indian market  is  also  largely  affected  by price and,  therefore,  the circulation of the newspapers may be adversely affected  if the company  fails  to meet any price competition.

Changes in technology may render the current technologies obsolete or require the company to make substantial capital investments.

RECOMMENDATIONS - INVEST

CRISIL GRADE -4

HMVL is a professionally run company and focuses a lot on adopting good corporate governance practices. It is a subsidiary of HT Media, which has been acknowledged as one of the top 25 companies adopting good corporate governance practices for 2009 by the Institute of Company Secretaries of India. HMVL draws its governance practices from HT Media itself and is expected to have similar robust board practices. HMVLhas a completely different senior and second line  of management

FORTHCOMING IPOS – CRISIL GRADE

NAME OF THE COMPANY	GRADE
GUJARAT PIPAVAV	4
OBEROI REALTY	4
INDOSOLAR	3

IPO INVESTING- KNOW YOUR MERCHANT BANKER-2

The performamence of IPOs and the BRLMs associated

with the issues, that are listed from 01-01-10 until date,

are furnished below.

NAME OF ISSUER	ISSUE PRICE	CURRENT PRICE - AS ON 03-05-10.	MERCHANT BANKERS
JSW Energy	RS 100	RS 125	JM Financial. Kotak Mahindra , ICICI Securities , IDFC-SSKI, JP Morgan , SBI Capital Markets , Morgan Stanley and IDBI Capital
GODREJ PROPERTIES	RS 490	RS 500	ICICI Securities, Kotak Mahindra, IDFC- SSKI LIMITED and Nomura Financial Advisory.
DB CORP	RS 212	RS 246	Enam Securities, Citi Corp Markets, Kotak Mahindra Capital.
MBL INFRA	RS 180	RS 230	Motilal Oswal
BIRLA SHLOKA	RS 50	RS 70	Ashika Capital
INFINITE COMP	RS 165	RS 170	IIFL, SPA Merchant Bankers
JUBILANT FOODS	RS 145	RS 321	Kotak Mahindra
SYNCOM	RS 75	RS64	Chartered Capital
VASCON	RS 165	RS 153	Kotak Mahindra, Enam Securities
AQUA LOGISTIC	RS 220	RS 354	Saffron Capital, Centrum Capital
EMMBI	RS 45	RS18	Keynote
DB REALTY	RS 468	RS 436	Enam Securities, Kotak Mahindra
HATHWAY	RS 240	RS 209	Morgan Stanley, UBS Securities, Kotak Mahindra
ARSS INFRA	RS 450	RS 1206	IDBI Capital Markets, SBI Capital Market
REC	RS 203	RS 258	Kotak Mahindra Capital,  DSP Merrill Lynch, ICICI Securities, JM Financial Consultants, RBS Equities
TEXMO PIPES	RS 90	RS 62	Almondz Global
MAN INFRA	RS 252	RS 340	IDFC – SSKI, Edelweiss Capital.
UNITED BANK	RS 66	RS 80	SBI Capital Markets, Edelweiss Capital, Enam Securities.
NMDC	RS 285	RS 304	UBS Securities, CITI group global, Edelweiss Capital, Kotak Mahindra Capital, Morgan Stanely and RBS Equities.
PRADIP OVERSEAS	RS 110	RS 87	ANAND RATHI
SHREE GANESH JEWELLER	RS 260	RS135	Axis Bank Ltd. / ICICI Securities Ltd. / Avendus Capital
DQ ENTERTAINMENT	RS 80	RS103	SBI CAPS
GOENKA DIAMONDS	RS 135	RS101	SBI CAPS
INTRASOFT	RS 145	RS130	Collins Stewart Inga Private Limited and Anand Rathi Advisors
PERSISTENT	RS 310	RS392	Enam Securities private limited and J P Morgan India Private Limited
ILFS TRANSPORTATION	RS 257	RS 284	Enam Securities, Nomura Financial, HSBC Invest Direct, JM Financial Consultants.
THANGA MAYIL	RS 75	RS96	KEYNOTE CORPORATE