BUDGET 2011 HIGH LIGHTS

• PERSONAL INCOME TAX LIMIT RAISED TO RS 1.80LACS

• CAPITAL INFUSION OF 20,000CR PLUS TO PSU BANKS INFY12.
• DISINVESTMENT TARGET AT RS 40,000CR FOR FY12
• FIIS ALLOWED TO INVESTMENT  MF SCHEMES
• PRIORITY HOME LOAN LIMIT RAISED TO RS 25LACS.
• INTEREST SUBSIDY TO FARMERS @ 3%
• INFRA STATUS TO COLD STORAGE
• TO ALLOW FDI IN MF
• IIFCL DISBURSEMENT TARGET RS 25000CR
• FOOD SECURITY BILL TO BE INTRODUCED THIS YEAR
• AMOUNT ALLOTTED TO SOCIAL SCHEMES RS 58000CR
• CPI LINKED WAGES TO NREGS BENEFICIARIES
• AMOUNT ALLOTTED TO EDUCATION SECTOR 52000CR PLUS

IPO GRADING NEWS - SERVALAKSHMI GETS GRADE 2 FROM ICRA

The  IPO  grade  assigned  by  ICRA  reflects  the  favorable  long-term  demand  prospects  for  the  paper industry,  low  per  capita consumption of paper and the overall economic growth being witnessed in the country; the operational advantages  with  the  company  in  the  form  of  proximity  to  Tuticorin  Port  for  imports  and  exports, backward  integration  with  de inking  plant  and  captive  co-generation  power  plant  and  technology advantages. The  promoters’  established  track  record  in  the  paper manufacturing  and  engineering  industry  spanning  over  four  decades,  and  the  minimum  project execution  risks  on  account  of  completion  of Phase  I  and  commencement  of  commercial  production from April 2010. The grading also  factors  in  the anticipated  supply glut  in  the  industry with ongoing capacity  expansion  programs  of  other  incumbents  in  the  medium-term  leading  to  possible  pricing pressures;  the cyclicality  inherent  to  the paper  industry  leading  to  fluctuating profit margins; and,  the high  fragmentation  in  the  industry.  The  grading  is  also  constrained  by  the  vulnerability  of  profits  to forex rate fluctuations as the company is exposed to exports (currently estimated at 20% of total sales) and  imports  (currently estimated at 70% of  total purchases  including  imported  fuel  for co-generation power plant); the limited track record with production under stabilization and the weak financial risk profile with high gearing (4.27 times as at end-March 2010).

IPO ANALYSIS: LOVABLE LINGERIE LIMITED – BLOATED EQUITY, PRICING NOT SO LOVABLE– AVOID.

The Mumbai based inner wear manufacturer is entering the capital markets, with issue of 45,50,000 equity shares of Rs 10 each in the price band of Rs 195-205. The company recently raised Rs 20cr (Pre IPO placement) by allotting 10 lakh equity shares @Rs 200 to SCI Growth Investments, including share premium of Rs 190. Anand Rathi is the BRLM. 

The issue opens on 08-03-11 and closes on 11-03-11.

BUSINESS:

The company, incorporated in the year 1987, is one of the country’s leading women’s inner wear manufacturers.  The products include brassieres, panties, slips / camisoles, home wear, shape wear, foundation garments and sleepwear products. The Company acquired the brand “Lovable” from Lovable World Trading Company, USA, on an exclusive basis for the territories of India, Nepal, Sikkim and Bhutan. The inner wear products manufactured under the brand “Lovable” cater to the premium segment market in the country. 

Lovable and Daisy Dee are the flagship brands.  Lovable is amongst the top preferred brand in women’s inner wear in the country. As part of the growth strategy, the company has diversified the portfolio of brands and acquired brands like Daisy Dee from Maxwell Industries Limited, and College Style from Levitus Trading Limited, Hong Kong. 

The company has three manufacturing facilities of which two are situated in Bengaluru and one is situated in Roorkee, Uttarakhand. The company has a total installed capacity of 30 lac pieces each per annum to manufacture brassiere and panties.

Going forward, the company proposes to implement a project for modernization and integration at a new location in Doddakalasandra, Bengaluru, which will result in increase in capacity and value-addition by 25 lacs pieces per annum. The manufacturing unit situated at Roorkee, Uttarakhand commenced operation in February, 2010 and has an installed capacity of 7.5 lac pieces per annum to manufacture brassiere and panties. 

OBJECT OF THE ISSUE

 The objects of the Issue are:

1.  Setting up of a manufacturing facility to create additional capacity at Bengaluru.

2.  Expenses to be incurred for Brand Building;

3.  Brand Development expenses for “College Style” 

4.  Investment in Joint Venture;

5.  Setting up of Exclusive Brand Outlets

6.  Setting up of retail store modules for “shop-in-shop”

7.  Up gradation of design studios

8.  General corporate purpose

FINANCIALS:

RS IN CRORES

	08	09	10
TOTAL INCOME	63.08	68.81	86.79
PAT	4.16	2.87	10.55
EPS (RS)	6.31	3.82	14.07##

## On an equity of Rs 7.50cr, the post issue equity will be Rs 16.80cr.

MATTERS OF CONCERN:

a. The company has capitalized its reserve by issuing bonus shares (97,50,000) to the promoters in the year 2010. This, along with the present issue will raise the equity base to Rs 16.80cr.

b. Labour intensive industry and hence may face labour disruptions, which may affect the production, profitability.

c. For setting up of additional manufacturing facilities at Bangalore, the appraisal was done by BOB in 2009, for which a Term loan of Rs 16.33cr has been sanctioned by BOB. However, for the purpose of IPO, the company again has included the entire amount as cost of the project. One wonders what happened to the Term Loan availed, for the same purpose.

d. The land on which the proposed expansion is to be carried out is a disputed one. The expansion is likely to be delayed.

e. The Company is dependent on third party transportation providers for the supply of raw materials and delivery of the products and any disruption in their operations or a decrease in the quality of their services could affect the Company's reputation.

VALUATION AND RECOMMENDATIONS:

At Rs 195-205, the issue is very expensive, considering the bloated equity before the IPO. Assuming that the company will report a PAT of Rs 12cr for FY 11 (up 20% over previous year), the EPS on the post issue equity of Rs 16.80cr will be around Rs 7/- and the PE will be around 28 which makes the IPO expensive.  Most of the IPO funds will be spent on brand building, JV and Exclusive out lets, which may not add up to higher margins. Compared to the previous years, the margin in the year 2010, (IPO in mind) has improved substantially which is to be taken with a pinch of salt.   IPO grade 3 by CARE.  

AVOID SUBSCRIPTION.

FORTHCOMING IPO

NAME OF THE COMPANY	TD Power Systems Limited
PROMOTERS	NIKHIL KUMAR, HITOSHI MATSUO, MOHIB N. KHERICHA AND SAPHIRE FINMAN SERVICES PRIVATE LIMITED
ISSUE SIZE	RS. 2,500 MILLION
BRLM	Enam Securities,  Antique Capital Markets,  Equirus Capital Private Limited
REGISTRAR	Link Intime India Private Limited

IPO NEWS - SUDAR GARMENTS AND ACROPETAL SCRAPE THROUGH

The IPOs which closed for subscription today, barely managed to get one time plus subscription.

FORTHCOMING IPO

NAME OF THE COMPANY	TREE HOUSE EDUCATION & ACCESSORIES LIMITED
PROMOTERS	RAJESH BHATIA AND MRS. GEETA BHATIA
ISSUE SIZE	PUBLIC ISSUE OF UPTO  9,696,343 EQUITY SHARES OF FACE VALUE OF RS. 10 EACH
BRLM	JM FINANCIAL CONSULTANTS PRIVATE LIMITED MOTILAL OSWAL INVESTMENT ADVISORS
REGISTRAR	LINK INTIME INDIA PRIVATE LIMITED

IPO SUBSCRIPTION STATUS

Sudar Garments is subscribed to the extent of  75% and Acropetal to the extent of  58% on the penultimate day.

Both the IPOs closes tomorrow.

IPO NEWS - AGS TRANSACT GETS 3/5 GRADE FROM ICRA

The  Initial Public Offer  of  AGS Transact Technologies Limited  has got grade 3 from the rating agency - ICRA

The company proposes to issue 62,50,000 shares  of  face  value  Rs.  10  each.  The  issue  is  being made  through  the  100%  book  building  process.

The  company is   into  the business of managing and  running ATMs  for banks as a
semi-autonomous  IAD( Independant ATM Developer) since 2009.

A  semi-autonomous  IAD  provides  a  combination  of  services  that  include  site identification and deployment,  installation, ownership and management of  the ATM and  the ATM  site on behalf of the sponsor bank. The sponsor bank retains the license and the responsibility of cash in the ATM along with clearing and settlement process. AGSTTL has received an order  to act as a semi-autonomous
IAD  and  has  contractual  arrangements  with  Dhanlaxmi  Bank  and  Axis  Bank  for  380  and  1,607  ATMs respectively.

During 2009-10, the company has reported an operating income of Rs. 281.43 cr and a profit after tax of  Rs. 21.59 crore. 

FORTH COMING IPOS

NAME OF THE COMPANY	ADROIT INDUSTRIES (INDIA) LIMITED
PROMOTERS	MUKESH SANGLA,  SAURABH SANGLA & SIGNET INDUSTRIES LIMITED
ISSUE SIZE	RS. 5000.00 LACS
BRLM	Chartered Capital And Investment Limited
REGISTRAR	Link Intime India Private Limited
NAME OF THE COMPANY	Super Religare Laboratories Limited
PROMOTERS	MALVINDER MOHAN SINGH,  SHIVINDER MOHAN SINGH, MALAV HOLDINGS PRIVATE LIMITED, SHIVI HOLDINGS PRIVATE LIMITED, OSCAR INVESTMENTS LIMITED AND MAPLE LEAF BUILDCON PRIVATE LIMITED
ISSUE SIZE	PUBLIC ISSUE OF UP TO 28,000,000 EQUITY SHARES OF FACE VALUE OF RS 10 EACH
BRLM	NOMURA FINANCIAL KOTAK MAHINDRA CAPITAL COMPANY LIMITED ,  RELIGARE CAPITAL
REGISTRAR	KARVY COMPUTERSHARE PRIVATE LIMITED

FOR - PROFIT MFIs ARE LOAN SHARKS

Muhammad Yunus, the father of micro finance and who revolutionized the micro finance sector in Bangladesh says for profit MFIs are loan sharks. While analyzing the IPO in July 2010, Firstchoice had indicated the same and advised the investors to stay away from the IPO. Infosys mentor has a stake in the only listed loan shark MFI.

CRICKET - WORLD CUP MATCHES - PREDICT THE WINNER

Log on to www.newsarticlesbengaluru.blogspot.com to predict the winner on daily basis.

IPO ANALYSIS: FINEOTEX CHEMICAL LIMITED – NEITHER IT IS FINE NOR HAS ANY SPECIALITY – AVOID.

The Mumbai based, Specialty Chemicals and Enzymes manufacturer is entering the capital market on 23-02-11 with issue of 42, 11,160 equity shares of Rs 10 FV, in the price band of Rs 60-72. The issue closes on 25-02-11. The company intends to raise Rs 25.27cr at the lower end and Rs 30.32cr at the upper end of the price band. The issue constitutes 37.5% of the post issue capital of Rs 11.22cr. Indbank Merchant Banking are the sole BRLM.

The company manufactures Specialty Chemicals and Enzymes to Textile & Garment, Construction , Leather, Water Treatment and for Agrochemicals industry. FCL claims it manufactures over 100 products. Currently, the company has manufacturing facilities at Mahape, in Navi Mumbai. It has an installed capacity of 5,000 MT/annum.


The company’s major customers include Clariant Chemicals, Pidilite Industries, Croda Chemicals, Rashtriya Chemicals & Fertilizers, The Bombay Dyeing & Mfg. Co. Raymond Group, Grasim Industries, among others. The company is also into merchant exports.

OBJECTS OF THE ISSUE

The present Issue is being made to raise the funds for the following purposes:

1) Setting up of manufacturing facility for production of specialty chemicals at Khopoli.
2) Setting up of Sales Office in Mumbai.
3) Working Capital Requirements.
4) General Corporate Purpose.

FINANCIALS:
.
On a total operating income of Rs. 20.92 cr in FY10, the company earned a PAT of Rs. 3.50 cr. And for H1FY11, the figures are - Rs 13.48cr and Rs 2.15cr respectively.

RISKS:

1. IPO grade 2 by CARE.

2. Small size of operations, unorganized and highly competitive industry.

3. High collection period.

4. Low entry barriers and customer concentration risk.

5. Some of the Promoter Group companies are in the similar line of business and this could cause a conflict of interest.

6. Listing only at BSE.

7. The company is yet to complete the land acquisition process.


VALUATION AND RECOMMENDATIONS:

At Rs 60-72, the company is demanding a valuation around 18 times on its FY11 earnings, on the post issue capital of Rs 11.22cr, which is very expensive. OMKAR Specialty Chemicals, which came out with an IPO at Rs 98 is languishing at 60% discount to its issue price. The IPO grading and listing only at BSE, are the other factors which discourages investment. AVOID.

IPO ANALYSIS: SUDAR GARMENTS – SLACKLY STICHED – AVOID.

The Mumbai based small time garments manufacturer is entering the capital markets with issue of 90,88,000 equity shares of Rs 10 FV, in the price band of Rs 72-77.  The issue opens on 21-02-11 and closes on 24-02-11. Ashika Capital Limited are the sole BRLM.

SUDAR Garments sells its own brands through distributors and multi-brand outlets. The company also undertakes contract manufacturing for several domestic apparel brands.

The company has manufacturing facilities at Khalapur, Raigad, Maharastra. At present, the company has installed capacity to manufacture 20 laks garments per annum. SUDAR functions as an integrated apparel manufacturer with the capability of designing and manufacturing involving cutting, body stitching, washing, ironing and finishing. 

OBJECTS OF THE ISSUE:

Expansion of the existing apparel manufacturing unit	26.29cr
Working Capital Requirement	25.00cr
Setting up Retail Outlets and for Brand Building	5.90cr
Meeting General Corporate Expenses

FINANCIALS

RS IN CRORES

	08	09	10
TOTAL INCOME	8.89	20.89	53.97
PAT	0.28	0.59	4.11
EPS	0.68	1.31	9.00

MATTERS OF CONCERN:

The funding requirements and deployment of the issue proceeds are based on management estimates and have not been independently appraised by any bank or financial institution.  Fully equity funded expansion without any contribution from the promoters.       

The company is yet to place orders aggregating to Rs 14.00 cr for entire plant and machinery.

The average cost of acquisition of Equity Shares Murugan Muthiah Thevar is Rs.14.72 per Equity Share. 

IPO grade 1 by CRISIL indicating below average fundamentals.

According to CRISIL, the assigned grade is constrained by Sudar’s weak corporate governance practices. One of the independent directors is closely involved in business activities and is known to influence the promoter’s business and financial decisions. 
Other independent directors do not have sufficient understanding of their role and lack

the ability to exercise management oversight. CRISIL believes this will limit the independent directors’ ability to act in the best interest of minority shareholders. Also, the company does not have a strong second line of management to match the growing business. While the company has taken steps to strengthen its team, the efficacy of the same will be seen only over the medium term. 
The grade is further impacted by a weak

business risk profile due to the company’s limited experience in retail business, the absence of long-term contracts and high dependence on few buyers for a bulk of its revenues.

VALUATION AND RECOMMENDATIONS

At Rs 72-77, the company is demanding a valuation of 24x on its FY11 earnings, on the post issue capital of Rs 18.54cr, which is very expensive. Well established companies in the segment, like Kewal Kiran Clothing, Mandhana Industries are trading around 12 PE. More over garment manufacturing is highly competitive sector with not so attractive margins. The company’s margin which was around 3% in the year 2009 has jumped to 8% in the year 2010. This kind of improvement in margins, before the IPO has to be taken with a pinch of salt.    AVOID SUBSCRIPTION.

The BRLM – Ashika Capital is not known for managing quality issues. Last year the company managed two issues namely Birla Shloka and Tiupati Inks. As against the offer price of Rs 50, Birla is trading at Rs 19 and Tirupati Inks at Rs 11 (issue price Rs 43).

IPO ANALYSIS: ACROPETAL TECHNOLOGIES LIMITED – WELL DESIGNED – INVEST.

The Bengaluru based, Engineering Design Service providing IT Company, plan to raise Rs 170cr through IPO, in the price band of Rs 88-90. D. Ravi Kumar and associates are the promoters of the company. Saffron Capital Advisors Private Limited are the sole BRLM. The issue opens on 21-02-11 and closes on 24-02-11.

BUSINESS

Acropetal offers a broad spectrum of Engineering Design Services to reduce product design cycle time and costs. The portfolio of services includes concept design, product design & development, advanced analysis, reliability engineering and value engineering, Product quality improvement, idea generation, product teardown, material cost-out, product re-design, back office support to accomplish 2D Drawings, Data Conversion and 3D Modeling are the value added services. 

Acropetal is currently working on the following competency based verticals:

         Engineering Design Services

         Healthcare Services

         Enterprise & IT Services

         Energy & Environment Services

         IT Infrastructure Management Services

         IT Security Consulting Services

Objects of the Issue are:

1.  To finance the funds required for potential acquisitions.

2.  To set up Software Development Centre cum Corporate Office.

3.  Expansion & Establishment of overseas offices.

4.  Part Repayment of Term Loans.

5.  Long Term Working Capital requirements.

FINANCIALS:       

 Acropetal reported a net profit of Rs. 35.71cr  on an operating income of Rs.

152.19cr in 2009-10, a substantial increase over the net profit of Rs. 18.92cr on an operating income of Rs.  97.1cr in 2008-09 (on consolidated basis).  During the nine months ended December 31, 2010, the company reported an operating income of Rs. 148.13cr and a net profit of Rs. 28.41cr, on consolidated basis.

COMPARISON WITH THE PEERS

             (RS IN CRORES)

	EPS	OPM (%)	CMP
Accentia Technologies	14.70	32	162
eClerx Services	12.45	48	650
Nucleus Software Exports	11.00	10	94
Acropetal	10.43	25	-

RISKS

      Dependence on few customers. Top five customers contributed approximately 80% of the income from operations.

Currency fluctuation. The company generates a significant portion of the revenues in U.S. Dollars and other foreign currencies, and significant portions of the expenses are incurred in Rupees.

OUT LOOK

·     Greater focus on cost and operational efficiencies in the recessionary environment is expected to enhance global sourcing. There is huge potential for global out sourcing business.

·     Services and software segments are estimated to grow at 6.1 per cent to cross USD 1.2 trillion by 2012.  

·     The worldwide BPO market is expected to grow at a CAGR of 11.9 per cent to reach USD 181 billion by 2012, while ITO market is expected to grow at a CAGR of 6.9 per cent and reach USD 275 billion by 2012

Domestic IT spending

The liberalization of Indian economy, de-regulation of key sectors and progressive moves towards further integrating India with the global economy has been a key driver of increased IT adoption in the country. This is best reflected in the fact that most indigenous players in telecom and banking, two key sectors with significant multinational corporation  participation, have significantly upgraded their levels of IT adoption to offer best-in-class services comparable to those offered by the global competition and these two sectors together account for approximately 50-60 percent of the domestic spend on IT services.

VALUATION AND RECOMMENDATIONS

The company’s track record of growth and profitability are excellent. Future growth prospects are good. Professionally managed company.

ICRA has assigned grade 3 to the IPO taking into account the robust revenue growth demonstrated by the company  in  the  past  few  years,  its  healthy  operating margins  and  efforts made  by  the  company  to strengthen its management by induction of several experienced management personnel during the last one year. The grading also takes into account the favorable growth prospects of the Healthcare and Energy segments where the company has entered lately. 

Subscription to the issue is recommended.

LISTING NEWS - OMKAR SPECIALITY CHEMICALS TO LIST ON 10-02-11.

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IPO GRADE 4 VS PERFORMANCES

As per definition, the IPOs with grade 4 should do well in the exchanges on listing. However, out of the 16 IPOs with grade 4 that hit the market in the year 2010 only four IPOs are quoting above the offer price. Although grading is one thing and pricing is another matter, there is appears to be some thing terribly wrong with the BRLMs and the Issuers on pricing front.

Small investors have suffered substantial losses, relying on the grading.

NAME OF THE COMPANY	ISSUE PRICE	MONTH	CURRENT MARKET PRICE
UNITED BANK	66	MARCH	95
IL&FS TRANSPORTATION	258	MARCH	249
PERSISTENT SYSTEMS	310	APRIL	359
SJVN LIMITED	26	APRIL	21
HINDUSTAN MEDIA VENTURES	166	JULY	149
SKS MICRO FINANCE	985	AUG	698
BAJAJ CORP	660	AUG	385
GUJARAT PIPAV	48	SEP	53
EROS	175	OCT	158
ORIENT GREEN POWER	47	OCT	26
VATECH WABAG	1310	OCT	1367
ASHOKA BUILDCON	324	OCT	259
TECPRO SYSTEM	355	OCT	317
OBEROI REALTY	260	OCT	235
A TO Z MAINTENANCE	400	NOV	285
PUNJAB AND SIND BANK	120	DEC	108

IPO NEWS - RATANCHAND JEWELLERS PLANS IPO

The Bangalore based jeweller is planning an IPO for its proposed expansion. The company intends to mobilize Rs 150cr from the proposed issue. The IPO is likely to hit the market in the second quarter of FY 11.The company intends to use the issue proceeds to upgrade its existing manufacturing capacity, to set up 12 retail stores in the state of Karnataka and to meet the long term working capital requirements.

FORTHCOMING IPO

NAME OF THE COMPANY	Gajra Differential Gears Limited
PROMOTERS	RITA R. GAJRA, MR. RAJ D. KIRTANI AND R. B. GAJRA HUF
ISSUE SIZE	PUBLIC ISSUE OF 60,00,000 EQUITY SHARES OF RS. 10/- EACH
BRLM	ASHIKA CAPITAL LIMITED
REGISTRAR	BIGSHARE SERVICES PRIVATE LIMITED