Showing posts with label ipo analysis t d power ipo note t d power ipo recommedations t d power. Show all posts
Showing posts with label ipo analysis t d power ipo note t d power ipo recommedations t d power. Show all posts

Monday, August 22, 2011

IPO ANALYSIS: T D POWER SYSTEMS LIMITED -AGGRESSIVELY PRICED - AVOID.









Price band Rs 256-261
Issue size - Rs227cr
IPO grade 4 by CARE
Issue open / closes on 24-08-11 /26-08-11


T D Power is one of the leading manufacturers of AC Generators with wide capacity range, for prime movers, such as steam turbines, gas turbines, hydro turbines, wind turbines, diesel and gas engines. T D specializes in custom-designed generators for customers, across the world. The company also manufactures motors.

The company since inception has manufactured a total of 1,538 generators with an aggregate output capacity of 12,657 MW, of which 233 generators have been supplied to customers across 34 countries.

In addition to manufacturing AC Generators the Company also executes Turbine Generator island projects for steam turbine power plants including designing, procurement and supply of equipment, assembly, installation & commissioning.

The customer base comprises of companies operating in the industrial sector and includes cement, steel, paper, chemical, metals, sugar co-generation, bio-mass power plants, hydro-electric power plants and Independent Power Plants companies. The clients include Balrampur Chini Mills Limited, Nava Bharat Ventures Limited, Chettinad Cement Corporation Limited, Shree Cements Limited and Vasavadatta Cements.

OBJECTS OF THE ISSUE:

The company intends utilize Rs 103cr for expansion of manufacturing facility, Rs 29cr for building corporate office at Bangalore, Repayment of debt amounting to Rs 33cr, an amount of Rs 40cr towards working capital requirement.

The company till June 2011, has spent less than 10% on capacity expansion and yet to identify land for corporate office.

FINANCIALS: CONSOLIDATED (RS IN CRORES)


31-03-10

31-03-11

TOTAL INCOME

745

875

PAT

44

57

EPS (RS)

23

25

CHALLENGES:

In the last couple of years many corporates have entered the power sector, to take advantage of huge opportunity it provided. However, many of these companies could not deliver on the business front. Issues which have led to project delays include environment clearance, fuel linkages and rising cost of capital. These issues are not likely to be resolved in a hurry. Financial position of these companies due to delay in project completion are in bad shape. This, in the long run will affect, power equipment manufacturers like T D Power.

The customer base primarily comprises companies operating in the industrial sector. Slowdown in the growth in this segment may impact the performance.

Enam’s pathetic record as BRLM.

Enam is the lead BRLM along with Antique capital and Equirus capital. In the last two years Enam has managed 16 IPOs, out of which only 4 issues are quoting above the offer price. The issues that are quoting below IPO price areVascon, DB Realty, Jaypee Infra, Indo Solar, Ramky, Electro Steel, Ashoka Buildcon, Prestige Estates, ILFS Transport, Oberoi Realty and Future Ventures.

Coal India, Persistent, UBI and Eros are the 4 issues that trading above the offer price.

VALUATION AND RECOMMENDATIONS:

The expansion which is in excess of Rs 200cr is funded entirely through the equity. These are long gestation period projects. The revenue accrual and improvement in profitability will happen after 3-4 years. The IPO will not improve the earnings in the near future. In fact the earnings per share may come down due to increase in equity, on account of IPO.

Do not be misled by the IPO grading. Most of the grade 4 IPOs of last 2 years is trading much below the offer price. Enam’s judgment in IPO pricing is awful. The past track record of the lead manager does not inspire the investors to take a favorable call.

AVOID THE IPO.