Showing posts with label idea cellular. Show all posts
Showing posts with label idea cellular. Show all posts

Saturday, February 6, 2010

TEXMO PIPES AND PRODUCTS LIMITED: UNIMPRESSIVE TRACK RECORD – AVOI D

ISSUE DETAILS:

Public issue of 50,00,000 equity shares of Rs 10 face value in the price band of Rs 85 -90. The issue opens on 16-02-10 and closes 0n 19-02-10.The Company intends to raise around Rs 45cr from the IPO. Almondz Global Securities Limited are the Book Running Lead Manager.

PROMOTERS: Sanjay Agarwal, Rashmi Agarwal and associates are the promoters of the Company.

BUSINESS HISTORY:

The Company was started as a partnership firm under the name Shree Mohit Industries in 1999. It was converted into a Public Limited Company under the present name in 2008. Shree Mohit Industries started its operations in the financial year 1999-2000 with manufacturing of PVC, HDPE pipes. During 2000-01, the installed capacity was increased from 2928 MTPA to 4392 MTPA. The firm also introduced new products - plumbing pipe, conduit Pipe and PLB HDPE cable duct. Subsequently in the year 2003, the erstwhile firm started manufacturing suction & delivery hosepipe, elasto-meric sealing ring fit PVC Pipe (Gasket Pipe), SWR Pipe, column pipe, HDPE plain pipe, sprinkler pipe and drip irrigation system. The installed capacity was further increased to 6797.20 MTPA for PVC and to 7217 MTPA for HDPE pipes in subsequent years. The company to consolidate the operations, signed Business Transfer Agreement in 2008 for purchase of specified assets and liabilities of the three promoter group entities - Shree Balaji Industries, Shree Venkatesh Industries and Shree Padmavati Irrigation Private Limited.
Idea cellular, Tata communications and Aditya Birla telecom limited are among the top clients of the company.

OBJECTS OF THE ISSUE:

The company intends to utilize the proceeds of the issue to increase the product range (Rs 11.33cr), for setting up manufacturing facilities for injection mouldings/ fittings and
Woven sacks (Rs 22.06cr) and for meeting long-term working capital requirements (Rs 10.00cr), among others. However, the fund requirements and the funding plans are as per the management’s estimates, and have not been appraised by any Bank / Financial institution.


FINANCIALS: 07 08 * 09* (Rs in crores)

Total Income 20.48 59.08 47.03

Net Profit 0.41 4.26 4.33

*Figures include revenues of partnership firms prior to conversion.

EPS (Rs) 0.68 7.11 7.68

MATTERS OF CONCERN:


1. While converting the partnership firm viz. ‘Shree Mohit Industries’ it into a public limited company, independent valuation was not done. The same was done as per the estimates of the management.

2. During 2007, the company was debarred by BSNL for award of any further work / contract for a period of one year. Reliance Communication Infrastructure Limited invoked the performance guarantees twice in 2007, once by BSNL in 2008.

3. The company is yet to place orders for 100% of the plant & machinery, equipment, etc. for the proposed project.

4. The average cost of acquisition of Equity shares by the Promoters is Rs 10.20.

5. Texmo faces competition from both organaised and un organaised sector.The major competitors are Jain Irrigation India Limited, Kriti Industries India Limited, Kisan Mouldings, Manjushree Extrusions, Precision Pipes, and Nagarjuna Pipes. Further, there are no entry barriers in this industry and any expansion in capacity by existing manufacturers would further intensify competition.

6. The Company has no history of dividend payment.


DEMAND OUT LOOK AND OPPORTUNITIES:

Increase in real estate construction due to urbanization and demand for homes and government impetus on increasing the use of irrigational facilities in the farming sector will drive growth in PVC pipes. The Eleventh five-year plan aims at adding 11 mn hectares of irrigational facilities, thus requiring huge investments in the sector. it is estimated that steel pipes will witness robust demand of 22% - 25% in next 3-5 years. SAW pipes and exports will lead the growth in demand. However, exports could be plagued to a certain extent by slowdown in US economy. Cement and PVC pipes are expected to sustain growth momentum of 16% - 18%.

• Low pipeline penetration in India compared to developed nations.
• GoI’s thrust on infrastructure development & water supply.
• City gas pipe projects.
• Higher export market due to proximity to Middle East, which accounts for 14% of the global planned projects.

VALUATION AND RECOMMENDATIONS:

At the higher end of the price band (Rs 90/-) the company demands P/E of 12 on FY 09 earnings. For a mid-tier and family owned, controlled company the valuation is very much stressed. Precision Pipes and Profiles company Limited, another player in the segment, whose book value is around Rs 100/- is presently quoting at Rs 76/- (around 7 P/E). The rating agency CARE has awarded grade 2 for the IPO indicating below average fundamentals. Investors are advised to stay away from the issue.