Sunday, April 29, 2012

SAMVARDHANA MOTHERSON IPO REVIEW - AVOID




For the 9 months ended 31-12-11, the company reported a total income of Rs 6025cr and loss of Rs 129cr. For FY12, the loss could be around Rs 200cr. The company post issue will have equity around Rs 593cr.  Considering the Samvardhana demands a PE multiple of 10, the company should report a net profit after tax of Rs 590cr in FY13, which is unlikely. The funds are intended for reduction / prepayments of debt, investments in joint ventures and not for capacity expansion. One of the promoters is also part selling his stake in the offer for sale. It will take another year or two for the company to consolidate its operation and report decent bottom line.

AVOID THE IPO.

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