Showing posts with label lodha ipo recommendations. Show all posts
Showing posts with label lodha ipo recommendations. Show all posts

Monday, June 21, 2010

IPO ANALYSIS: ASTER SILICATES LIMITED – MUST AVOID.






The Ahmedabad based Sodium Silicate manufacturer is entering the capital market to mobilize Rs 53.10 cr through an IPO. The issue will open on 24-06-10 and close 0n 28-06 -10. The company intends to issue shares of Rs 10 FV in the price band of Rs 112-118.  Saffron Capital Advisors Private Limited are the sole BRLM.

Promoters: Mr. Mahesh A. Maheshwari, Mrs. Namrata Mahesh Maheshwari.


BUSINESS:

Aster Silicates Limited (ASL) commenced manufacture of Sodium Silicate in 1997.  The Company  now  operates  two  units  in Gujarat  at Kheda  and Bharuch  having  a  capacity  of  100 metric  tonnes per day  (MTPD) and 50 MTPD respectively. Kheda unit has three furnaces and Bharuch has one furnace. These  are  triple  pass  regenerative  and  recuperative  end  fired  glass furnace with multiple fuel arrangement capable of using bio gas, natural gas and coal.

ASL manufactures  sodium  silicate  which  includes  food,  special  drilling  and  detergent  grade silicate  in  glass  and  liquid  form.  Food  grade  sodium  silicate  is  used  in  the manufacturing  of Silica  precipitate  and  gel  which  finds  its  applications  in  toothpaste,  salt,  cosmetics,  glucose powder, tire & rubber and pesticides etc. Sodium silicate, (special drilling grade silicate) is also used in offshore drilling, for reactivation of old oil, and gas fields. 


OBJECTS OF THE ISSUE:

The funds are intended to be used for - Expansion of Manufacturing facilities and to meet the additional Working Capital Requirements.


FINANCIALS:
 
The company achieved a turn over of Rs 32.09cr and net profit of Rs 2.54cr for the FY09. For the six months ended Sept -09 the revenue recorded is Rs 30.09cr and a net profit of Rs 2.32cr.

RISKS / MATTERS OF CONCERN:


  • Basic raw material constitute major portion of cost of production in the chemical industry. Indian chemical industry uses either natural gas or crude oil as feedstock for manufacturing process.  The fluctuations in oil prices therefore affects the growth projections.

·         The objects of the Issue for which funds are being raised have not been appraised by any bank or financial institution.

·         The company is yet place orders for Plant and Machinery aggregating Rs. 744.99 Lacs.

·         The Company has a negative cash flow in the past 5 years.

·         Top five clients contributed approximately 80.90% of  sales for FY 2009. High business risks.

·          Company has no history of dividend payment.

·         Company has history of related party transactions.

·         IPO grade -2 by Brickworks, indicating below average fundamentals.


 .       Criminal case to the tune of Rs. 4.69/-  lacs and excise case to the tune of Rs. 21.05  lacs has been filed against the company and arbitration  proceedings to the tune of Rs. 371.07 lacs have been initiated by the  Company against Gas Authority of India Ltd.

·     The company has also revalued the fixed assets and increased the value by Rs  492.01 lacs in the FY 09. 

RECOMMENDATIONS

Risks associated with the project / company are very high. The issue is irrationally priced.             Investors are advised to stay away from the issue.

Monday, February 15, 2010

IPO ANALYSIS -LODHA DEVELOPERS LIMITED:PREMIUM OVERLOADED - AVOID

The Mumbai Metropolitan Region focused real estate developer is planning to raise around Rs 3000 cr through IPO. The company proposes to issue equity share of Rs 5/ each in the price band of Rs 560 - 600/ share. The issue is likely hit the market in the next two/three weeks. Enam Securities, J P Morgan Stanley, Citi Group Global Markets and Global Trust Capital Finance private limited are the Book Running Lead Managers.

BUSINESS:

Mangal Prabhat Lodha founded the Lodha group in 1980. In the years following its inception the Lodha group concentrated on developing affordable housing in the suburbs of Mumbai and from 2002 onwards, the group diversified into other segments and regions in the Mumbai Metropolitan region. As of June 30, 2009 the Lodha group had developed approximately 9,771,299 square feet of saleable area. The company has received awards and recognition including being selected as one of India’s top ten builders by Construction World. The company is one of the recognized players in the premium segment.

Currently, the company has 38 ongoing projects, of which 35 projects are in the Mumbai Metropolitan Region and one project each in Hyderabad, Pune and Lonavala, giving the company the presence across different segments and price points. These projects account for an estimated saleable area of approximately 29,871,021 square feet. The company also has another 11 projects in pipe line with an estimated saleable area of approximately 36,228,877 square feet. The ongoing and planned projects would give the company near to medium term cash flow visibility. In all the company has land reserves of approximately 139,206,419 square feet, of which approximately 99.67% is in the Mumbai Metropolitan Region.

OBJECTS OF THE ISSUE

The company proposes to utilize the proceeds of the issue towards construction expenses of the ongoing and planned projects, funding certain subsidiaries for prepayment/repayment of their loans and General corporate purposes.

FINANCIALS

The company’s revenue and net profit has shown study increase during the last three years. As on 31-03-09, the total income of the company stood at Rs 950.60cr and net profit of Rs96.22cr. However, the company’s net profit margin has come down from about 25% in 2007 to as low as 10% in 2009. The company had negative cash flow during 08 and 09.

EPS (in Rs.) Face Value (Rs. 5)*


March 31, 2007   


2.24
March 31, 2008   
2.88     


March 31, 2009   
4.34  




Weighted Average 3.51

(*Adjusted for the split of equity shares of face value Rs. 100 to face value of Rs. 5, the issuance of bonus.)
As of March 31, 2009, the NAV is 12.21 per share of face value of Rs.5.


COMPARISON WITH INDUSTRY PEERS: (Fiscal 2009)










EPS
NAV
       P/E
RONW
(%) 





HDIL
24.00
 178.00
6.00
                    
           20.50
DLF
9.10
71.50
  
          25.00
   43.20





Unitech
3.00
30.40
        29.00
29.60





Lodha
4.34
12.21
---
19.93






VALUATION

The premium of Rs 560-600 is not justified on the Face Value of Rs 5/ share. At Rs, the P/E works out to in excess of 100. The industry peers, DLF, HDIL and UNITECH are quoting at an average P/E of less than 30.


RISK FACTORS/ MATTERS OF CONCERN:


1. The average cost of acquisition of shares by the promoters is less than Rs 2.00/share.


2. The Company is heavily dependent on the performance of, and the prevailing conditions affecting, the real estate market in the Mumbai Metropolitan Region.

3. Lodha Developers experienced rapid growth in the recent past and may not be able to sustain the growth or manage it effectively.

4. The Company has granted unsecured loans to certain entities, which are not the subsidiaries or Group Companies.


5. The Company has incurred substantial indebtedness to finance development of ongoing and planned projects. As of March 31, 2009, the outstanding loans were in excess of Rs. 1000.00crores.


6. The company operates in a highly competitive sector, whose fortunes are neither stable nor certain. Family owned and controlled business enterprise. The profitability has shown declining trend.

7. The group (Subsidiary - Shreeniwas Cotton Mills Limited) had defaulted to State Bank of India in respect of loan availed. The matter is pending in DRT court.

8. The rating agency CARE has awarded grade – 3 for the IPO, indicating average fundamentals.

9. The company had negative cash flow in the last three years.


THE CHALLENGES

The company’s operations are presently focused in the Mumbai Metropolitan Region. The supply of land in Mumbai and particularly in south and central Mumbai is limited and acquisition of new land in these and other parts of Mumbai poses substantial challenges and is highly competitive. In addition, due to the limited supply of land, the acquisition of land in Mumbai is costly. The company had acquired land in Mumbai in the past through participation in the auction of mill lands by the National Textile Corporation and in the suburbs of Mumbai through private land acquisitions. There is no assurance that the company will be able to continue to acquire land through such or other means. Due to the increased demand for land in connection with the development of residential, commercial and retail properties, the company may experience increased competition in the attempt to acquire land in the geographical areas in which the company operates and the areas in which they anticipate operating in the future. This increased competition may result in a shortage of suitable land that can be used for development and can increase the price of land.


RECOMMENDATIONS:


Investors may better avoid the IPO of Lodha Developers, considering the high premium sought, uncertain sector they operate and other observations made above. .