Saturday, July 24, 2010

IPO ANALYSIS: PRAKASH STEELAGE LIMITED WILL SHINE – INVEST.







The Gujarat based stainless steel pipes and tube manufacturer is entering the capital market on 05-08-10, with public issue of 62,50,000 equity shares of Rs 10 FV in the price band of Rs 100-110. The company plans to raise around Rs 70 cr through the issue. Keynote Corporate Services Limited are the sole BRLM. The issue will close on 10-08-10.

Prakash C Kanugo and Ashok M Seth, first generation enterprenners, are the promoters of the company.

BUSINESS:

Prakash Steelage Limited (PSL) is a flagship company of Prakash Group. The company incorporated in 1991  is engaged in  the  manufacturing  of  seamless  &  welded  stainless  steel  Pipes, Tubes  and  U-tubes. The company has state of the art production units situated at Silvasa and Umbergaon (Gujarat) with total installed production capacity of 12200 MTPA. 
The company is also a government recognized export house, exporting to more than 40 countries. The company caters to diverse set of industries, including oil and gas, power, pharmaceuticals, petrochemicals, automobiles, sugar and dairy.




OBJECTS OF THE ISSUE:

  • Expansion of existing manufacturing facility at Umbergaon, Gujarat.
  • Meet the additional working capital requirement.
  • General corporate purposes.


FINANCIALS:

The company achieved a turnover of Rs 440 cr and net profit after tax of Rs 17.50 cr for the year ended March 31, 2010.  The figures for the FY 09 were Rs 322.47cr and Rs 7.49cr respectively.
  

MATTERS OF CONCERN:


·         Corporate governance -The income-tax authorities have carried out search and seizure operations in the premises of the Company and during this operation Mr. Prakash C. Kanugo has made certain voluntary disclosures in relation to undisclosed income on behalf of himself and his related individuals/group companies/concerns, which included the Company. Under which, tax paid on the un declared income was Rs. 2,70,96,896/-

·         The company experienced a negative Operating Cash Flow from activities in the Financial Year 2008-09, 2007-08, 2006-07 and 2005-06.



VALUATION AND RECOMMENDATIONS:

Based on the capacity expansion from12, 200 tonnes to 19,000 tonnes, the company is likely to achieve a CAGR around 30% for FY 11. The company specializes in meeting specific requirements of customers and offers complete solution for stainless steel welded & seamless pipes and tubes, for which there is growing demand.
On the post issue capital of Rs 17.50cr, the company is likely to post an EPS of Rs 15/. At Rs 100-110 the issue is attractively priced. Compares favorably with other established and listed entities like Zenith Birla and Ratnamani Metals and Tubes.   APPLY.

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