Tuesday, September 13, 2011

IPO ANALYSIS: PRAKASH CONSTROWELL LIMITED - NO 'PRAKASH' IN IT - AVOID.

ISSUE DETAILS:

ISSUE SIZE

RS 60CR

PRICE BAND / FV

RS 130- 138 / RS 10

ISSUE OPENS / CLOSES ON

19-09-11 / 21-09-11

IPO GRADE

2 BY CARE

BRLM

INTENSIVE FISCAL SERVICES

REGISTRAR

BIG SHARE

FIRST CHOICE IPO RECOMMENDATIONS

AVOID.

The Nasik head quartered, Prakash Constrowell Limited (PCL) will hit the capital market next week. PCL is engaged in the business of civil construction, infrastructure/industrial construction and real estate development. Majority of its projects have been undertaken within the state of Maharastra.

PCL claims to have under taken projects for NBCC, Cancer hospital at Aurangabad and Police training school in Mumbai, among others.

The company intends to utilize the IPO proceeds to meet the working capital requirements, purchase of construction equipments, investments in subsidiaries and for general corporate purposes.


FUDGED WORKING CAPITAL ASSESSMENT

The working capital assessment (Rs 35Cr from the IPO) appears to be fudged.

The projected current asset for FY 12 has been estimated at 50% over the actuals of FY 11. However the current liabilities have been reduced by 50% over the actual figure of FY 11, for FY 12 assessment. This is very unusual. The current liabilities also should have been fairly estimated at higher level, in correspondence with increase in business volume. This assessment appears to be fudged.

FINANCIALS:

For the year ended 31-03-11 the company reported an income of Rs 127cr, PAT of Rs 10.65cr and EPS of Rs 12. The figures for the previous year were Rs 116cr, Rs 7.70cr and Rs 9.09, respectively.

MATTERS OF CONCERN:

  1. PCL has relatively moderate scale of operations, fluctuating operating profit margins in the highly competitive industry.

  1. Geographical concentration of projects in the state of Maharastra and the client concentration risk. Most of the contracts awarded are from Government of Maharastra/semi government entities.

  • Being an employer in the labour intensive industry, the company is yet to obtain mandatory registration in this respect and also registration for ESI.

  1. Auditors have qualified the accounts in the last 5 years.

  1. Promoters / promoter group are engaged in similar line of business, there by causing clash of interest.

  1. Project not apprised / funded by banks / FIs.

  1. The company had negative cash flow in the last 3 years.

  1. Average cost of acquisition of shares by promoters is just 0.50 paisa.


VALUATION AND RECOMMENDATIONS:

PCL is a small time family owned, unprofessionally managed company. Real estate / construction sector is going through rough and challenging times. Only those companies with real values will be able deliver at the stock market. The recently listed IPOS in the segment like – Vascon, RPP Infra and Maninfra are quoting discount to issue price.

POOR QUALITY IPO. AVOID

2 comments:

  1. MR.PRASANNA I WOULD I LIKE TO ASK U THAT ON BASES R U NOT SUJJESTING ME TO INVEST IN PCL...?PLEASE SPECIFY PROPERLY SIR....THANKS

    ReplyDelete
  2. Pl read carefully, the matters of concern and valuation recommendations in the analysis.

    ReplyDelete