Gokul Refoils 195 10 to 12
Anus Laboratories 210 32 to 35
Niraj Cement 175 to 190 12 to 15
Bafna Pharmaceutical 40 10 to 12
Anus Laboratories 210 32 to 35
Niraj Cement 175 to 190 12 to 15
Bafna Pharmaceutical 40 10 to 12
Wednesday, May 28, 2008
Tuesday, May 27, 2008
Niraj Cement Structurals
Niraj Cement Structurals (NCSL) is a small-sizes construction company focusing on the road segment. It also makes pre-cast paver blocks. Sales of paver-blocks account less than 0.5% of total sales.
The construction contracts business model involves acting as main contractor, contracts through joint venture (JV) and subcontractor. Currently, the order portfolio is spread across Orissa, Madhya Pradesh and Rajasthan.
The proceeds of the issue will be used to fund acquisition of capital equipment worth Rs 20.95 crore and working capital requirement amounting Rs 18.17 crore.
Strengths
The current order book is about Rs 660.29 crore. Out of this, its share of work totals Rs 477.48 crore, which translates to 5 times its FY 2008 revenue. The projects are to be executed over nine to 24 months.
Despite focusing only on the road sector, the operating profit margin was a strong 17.7% in the year ending March 2008 (FY 2008). OPM were 16.7% in FY 2007 and 16.3% in FY 2006. This is way above the normal 8-10% of margin available for players focused on road projects.
Weaknesses
As the focus is solely on road development, lacks diversification in other areas of construction.
In the past, defaulted on payment of interest and repayment of loan to various banks / financial institutions.
Sundry debtors stood at 103.45 crore in FY 2008. This represents about 111.4% of its sales for FY 2008. To fund this, secured and unsecured loans of Rs 18.92 crore and Rs 19.98 crore were raised by March 2007 and Rs 30.86 crore and Rs 58.49 crore by March 2008. The high debts are attributed to delay in receipts from government and also from principal contractors. As a result, interest cost has been racing ahead from 3% of sales in FY 2006 to about 5.5% of sales in FY 2008.
Valuation
Sales grew by 16% in FY 2008. Net profit, however, stood higher by only 2%, limited by higher interest cost and tax incidence. EPS on post-IPO equity stands at Rs 6.3. On the asking price of Rs 175-Rs 190, the PE ratio works out to about 27.8 times FY 2008 earning at the lower price band and 30.2 times at the upper price band. In contrast, peer players such as C & C Construction, Roman Tarmat, PBA Infrastructure, Valecha Engineering trade at 9 to 12 times their trailing 12-month (TTM) EPS.
Monday, May 26, 2008
Niraj Cement Structurals IPO Analysis
Investors can avoid the Initial Public Offering of road building contractor, Niraj Cement Structurals. The asking price of Rs 175-190 appears stiff, given the small scale and limited scope of the company's business, fluctuation in profit growth and high risks specific to the company.
At the offer band, the price-earnings multiple works out to 19-21 times its FY-2008 earnings on the pre-IPO equity base.
The asking price also discounts its estimated FY-2009 per share earnings (post equity expansion) by at least 18 times. Peers of similar size trade at a considerable discount.
On the company and offer
Niraj is a road construction company with most of the projects in the form of sub-contracts from principal contractors. While the company also manufactures cement structurals, this business forms a negligible portion of the total revenue.
The company plans to raise about Rs 60 crore through this IPO and seeks to list the stock at the Bombay Stock Exchange. This would expand the current equity capital by 45 per cent.
The offer proceeds are to be utilised towards purchase of capital equipment and for meeting working-capital requirements.
High volume on the cards
Niraj currently boasts of a massive order-book of Rs 660 crore, amounting to seven times its 2007-08 revenue of Rs 92 crore. This is likely to provide impetus to the revenue growth witnessed by the company.
However, the limited time-frame available for completion of the projects poses a challenge to its execution capabilities. Most of the orders need to be completed within a 12-20 month period. Agreed that the company's plan (through the IPO proceeds) to increase capacities of its Ready Mix Concrete (RMC) batching plant would hasten the input availability, at least in the projects sites where they are installed. Transporting the RMC units between project sites may pose logistics problems.
In addition, the RMC batching plant planned would have a capacity of 1,44,000 cu. m. of RMC per year as against 20,000 cu.m consumed by it in FY-2008. This essentially implies that despite high orders in hand, the company may have excess capacities after captive consumption.
The sale or lease of the same may not be easy given that the market size for RMC remains limited in India, apart from transportation costs involved. The capital expenditure to be incurred hence holds risk of high costs.
Burdened by interest and taxes
The company's profit margins have remained in line with other road builders such as C&C Constructions and Roman Tarmat. However, net profits have witnessed a decline since 2005-2006.
Despite surge in revenues, mounting interest costs and taxes have dented the bottomline.
The mounting borrowing cost is reflected in the shrinking interest coverage ratio. While profits (before interest and taxes) covered the borrowing costs by fives times in 2006, the same ratio shrunk to 2.8 in the latest fiscal.
The company has further disclosed its default in payment of interest and repayment of loans to some of its lenders. Taxes have also seen an increase; this apart, the company has stated that it has been claiming deduction under Section 80-IA of the Income Tax Act, a benefit that is no longer available for contractors such as Niraj.
The offer document states that the company has not made any provisions for the additional tax burden either for the current year or for retrospective years from 2000. The provisioning and higher tax burden in future would hurt net profits.
Further, Niraj's sub-contract status has heightened its risks of non-payment from the principal contractor. Sundry debtors of Rs 103 crore, is higher than full year revenues for 2007-08, indicating legacy receivables and delay in collection.
This could lead to increased crunch in cash flows for the company. The offer is open from May 26-30.
At the offer band, the price-earnings multiple works out to 19-21 times its FY-2008 earnings on the pre-IPO equity base.
The asking price also discounts its estimated FY-2009 per share earnings (post equity expansion) by at least 18 times. Peers of similar size trade at a considerable discount.
On the company and offer
Niraj is a road construction company with most of the projects in the form of sub-contracts from principal contractors. While the company also manufactures cement structurals, this business forms a negligible portion of the total revenue.
The company plans to raise about Rs 60 crore through this IPO and seeks to list the stock at the Bombay Stock Exchange. This would expand the current equity capital by 45 per cent.
The offer proceeds are to be utilised towards purchase of capital equipment and for meeting working-capital requirements.
High volume on the cards
Niraj currently boasts of a massive order-book of Rs 660 crore, amounting to seven times its 2007-08 revenue of Rs 92 crore. This is likely to provide impetus to the revenue growth witnessed by the company.
However, the limited time-frame available for completion of the projects poses a challenge to its execution capabilities. Most of the orders need to be completed within a 12-20 month period. Agreed that the company's plan (through the IPO proceeds) to increase capacities of its Ready Mix Concrete (RMC) batching plant would hasten the input availability, at least in the projects sites where they are installed. Transporting the RMC units between project sites may pose logistics problems.
In addition, the RMC batching plant planned would have a capacity of 1,44,000 cu. m. of RMC per year as against 20,000 cu.m consumed by it in FY-2008. This essentially implies that despite high orders in hand, the company may have excess capacities after captive consumption.
The sale or lease of the same may not be easy given that the market size for RMC remains limited in India, apart from transportation costs involved. The capital expenditure to be incurred hence holds risk of high costs.
Burdened by interest and taxes
The company's profit margins have remained in line with other road builders such as C&C Constructions and Roman Tarmat. However, net profits have witnessed a decline since 2005-2006.
Despite surge in revenues, mounting interest costs and taxes have dented the bottomline.
The mounting borrowing cost is reflected in the shrinking interest coverage ratio. While profits (before interest and taxes) covered the borrowing costs by fives times in 2006, the same ratio shrunk to 2.8 in the latest fiscal.
The company has further disclosed its default in payment of interest and repayment of loans to some of its lenders. Taxes have also seen an increase; this apart, the company has stated that it has been claiming deduction under Section 80-IA of the Income Tax Act, a benefit that is no longer available for contractors such as Niraj.
The offer document states that the company has not made any provisions for the additional tax burden either for the current year or for retrospective years from 2000. The provisioning and higher tax burden in future would hurt net profits.
Further, Niraj's sub-contract status has heightened its risks of non-payment from the principal contractor. Sundry debtors of Rs 103 crore, is higher than full year revenues for 2007-08, indicating legacy receivables and delay in collection.
This could lead to increased crunch in cash flows for the company. The offer is open from May 26-30.
Bafna Pharmaceuticals IPO Analysis
Scalability concerns, low profitability and presence in the highly competitive formulations business without a specific niche, peg up the risks associated with the Initial Public Offering of Bafna Pharmaceuticals.
The 27-year-old company is proposing to offer 40.05 per cent stake to the public and use the net issue proceeds (of Rs 23.55 crore) to mainly undertake brand-building in domestic and international markets, partly repay loans and procure R&D equipment.
The fixed offer price at Rs 40 per share, also does not leave much on the table for investors, as it discounts the 2007-08 (annualised) earnings per share of the company at 37 times, on the post-issue equity base.
The pricing appears stiff compared to similar sized players in the formulations business, as well as other entrenched players engaged in Contract Research and Manufacturing Services (CRAMS) — an area Bafna is targeting through its new facility at Grantlayon, near Chennai.
Though CRAMS is an exciting opportunity for Indian companies, Bafna's size does not instil the necessary confidence in its ability to quickly occupy a position of strength and profitability in this area.
Bafna has long experience catering to less-regulated countries such as Sri Lanka but only limited experience in carrying out CRAMS in regulated markets.
Though these factors argue against an investment in the IPO, the stock may be worth reviewing, post-listing, with a longer financial record.
Business profile
Bafna Pharmaceuticals' profits have grown by 12 per cent on the back of 23 per cent growth in net sales on a compounded basis across five years.
The company now draws all of its revenues from its manufacturing facility at Madhavaram, near Chennai; a scale-up in revenues and margins could be expected once the Grantlayon unit gets MHRA accreditation, allowing it to enter the regulated markets of the UK and other European countries.
The company has signed a five-year agreement to supply Simvastatin — a drug to lower cholesterol levels — to a UK company.
However, it will be a little unreasonable to expect Bafna's Grantlayon unit to make considerable contribution to both topline and bottomline over the next 12-15 months because the business may take time to scale up its client base.
This could put pressure on existing financials as planned brand-building exercises, consisting of significant deployment of human resources in marketing, would see a bulge in expenditure from hereon, thereby shrinking already low operating margins (7 per cent).
Bafna displays high client concentration (top five contribute 80 per cent) and product dependence (top five contribute 65 per cent of sales) — typical of smaller entities.
Bafna plans to further scale up domestic business (exports contributed 30 per cent in last nine months ended December 2007) and launch its own brands as well as cater to new therapeutic areas (life-style diseases).
Challenges to these will arise from the substantial presence of large established players and Bafna's small scale of operations.
The 27-year-old company is proposing to offer 40.05 per cent stake to the public and use the net issue proceeds (of Rs 23.55 crore) to mainly undertake brand-building in domestic and international markets, partly repay loans and procure R&D equipment.
The fixed offer price at Rs 40 per share, also does not leave much on the table for investors, as it discounts the 2007-08 (annualised) earnings per share of the company at 37 times, on the post-issue equity base.
The pricing appears stiff compared to similar sized players in the formulations business, as well as other entrenched players engaged in Contract Research and Manufacturing Services (CRAMS) — an area Bafna is targeting through its new facility at Grantlayon, near Chennai.
Though CRAMS is an exciting opportunity for Indian companies, Bafna's size does not instil the necessary confidence in its ability to quickly occupy a position of strength and profitability in this area.
Bafna has long experience catering to less-regulated countries such as Sri Lanka but only limited experience in carrying out CRAMS in regulated markets.
Though these factors argue against an investment in the IPO, the stock may be worth reviewing, post-listing, with a longer financial record.
Business profile
Bafna Pharmaceuticals' profits have grown by 12 per cent on the back of 23 per cent growth in net sales on a compounded basis across five years.
The company now draws all of its revenues from its manufacturing facility at Madhavaram, near Chennai; a scale-up in revenues and margins could be expected once the Grantlayon unit gets MHRA accreditation, allowing it to enter the regulated markets of the UK and other European countries.
The company has signed a five-year agreement to supply Simvastatin — a drug to lower cholesterol levels — to a UK company.
However, it will be a little unreasonable to expect Bafna's Grantlayon unit to make considerable contribution to both topline and bottomline over the next 12-15 months because the business may take time to scale up its client base.
This could put pressure on existing financials as planned brand-building exercises, consisting of significant deployment of human resources in marketing, would see a bulge in expenditure from hereon, thereby shrinking already low operating margins (7 per cent).
Bafna displays high client concentration (top five contribute 80 per cent) and product dependence (top five contribute 65 per cent of sales) — typical of smaller entities.
Bafna plans to further scale up domestic business (exports contributed 30 per cent in last nine months ended December 2007) and launch its own brands as well as cater to new therapeutic areas (life-style diseases).
Challenges to these will arise from the substantial presence of large established players and Bafna's small scale of operations.
Friday, May 23, 2008
Stunner ! - IPO Rating - MCX India
CRISIL has assigned a CRISIL IPO Grade "5/5" (pronounced "five on five") to the proposed initial public offer of Multi-Commodity Exchange of India Ltd. (MCX). This grade indicates that the fundamentals of the issue are strong relative to other listed equity securities in India. However, this grade is not an opinion on whether the issue price is appropriate in relation to the issue fundamentals. The grade is not a recommendation to buy / sell or hold the graded instrument, or a comment on the graded instrument's future market price or its suitability for a particular investor.
CRISIL expects MCX to maintain its dominant market position in the commodities market, backed by product innovation and strong technological capabilities. Currently, MCX enjoys market leadership, with a share of 77 per cent in volumes traded on commodities exchanges in India. The company has consciously focused on commodities such as bullion, energy and metals, which are benchmarked to international prices. The high liquidity in these commodities and the low impact costs (comparable to other leading exchanges), along with MCX's strong technological capability - aided by its association with the promoter, FTIL, a leader in exchange related technology - are expected to help the company maintain its competitive advantage.
MCX's profitability and return indicators have been strong in the past 4 years. Growth is likely to moderate in the short term due to the impact of the commodity transaction tax (CTT). However, in the medium term, MCX's strong market position and continuous focus on product innovation would act as growth drivers. In the long term, growth could be spurred by the introduction of new instruments (like options) and participation by institutional players, once the necessary regulatory changes are in place.
Mr Jignesh Shah, the founder and Non-Executive Vice Chairman and Mr Joseph Massey, the MD & CEO of MCX, have been the driving force behind the company's business growth and product innovation. MCX also benefits from a strong and experienced senior management team as well as a highly capable product innovation and development team.
About the company and the issue
Multi-Commodity Exchange of India Pvt Ltd was incorporated on April 19, 2002. The proposed IPO is in the form of an offer for sale of 4 million shares by the promoters and a fresh issue of 6 million shares. Subsequent to the IPO, the promoters' stake in the company will reduce to 26.1 per cent.
On September 26, 2003, MCX received permanent recognition from the Government of India for facilitating online trading, clearing and settlement operations for commodity futures markets across the country. MCX offers trading in 56 different commodities categorised into various market segments such as bullion, energy, ferrous and non-ferrous metals, oil and oil seeds, cereals, pulses, plantations, spices, fibre and others. The company has leadership position in bullion, energy and metals trading in India.
Of the company's total turnover, bullion accounts for 53 per cent, metals for 28 per cent, energy for 16 per cent and agricultural commodities account for the rest. Globally, MCX is the largest silver exchange, second-largest natural gas exchange, third-largest gold, crude oil and copper exchange in terms of number of contracts traded in each of these commodities. MCX was the first exchange to launch futures trading in steel, crude oil and plastics in India. The company has launched weather indices such as RAINDEX - to track the progress of monsoon rains in locations such as Mumbai, Indore and Jaipur - and also trading in carbon credits on the exchange. MCX was also the first exchange to initiate evening trading sessions to coincide with trading on international exchanges such as London, New York and other international markets. The company's initiative to constantly innovate and develop new products is expected to help increase volumes.
For the year ended March 31, 2007, MCX reported a net profit of Rs 930 million on a turnover of Rs 2.0 billion, as compared with a net profit of Rs 375 million and revenues of Rs 1.0 billion in the previous year.
CRISIL expects MCX to maintain its dominant market position in the commodities market, backed by product innovation and strong technological capabilities. Currently, MCX enjoys market leadership, with a share of 77 per cent in volumes traded on commodities exchanges in India. The company has consciously focused on commodities such as bullion, energy and metals, which are benchmarked to international prices. The high liquidity in these commodities and the low impact costs (comparable to other leading exchanges), along with MCX's strong technological capability - aided by its association with the promoter, FTIL, a leader in exchange related technology - are expected to help the company maintain its competitive advantage.
MCX's profitability and return indicators have been strong in the past 4 years. Growth is likely to moderate in the short term due to the impact of the commodity transaction tax (CTT). However, in the medium term, MCX's strong market position and continuous focus on product innovation would act as growth drivers. In the long term, growth could be spurred by the introduction of new instruments (like options) and participation by institutional players, once the necessary regulatory changes are in place.
Mr Jignesh Shah, the founder and Non-Executive Vice Chairman and Mr Joseph Massey, the MD & CEO of MCX, have been the driving force behind the company's business growth and product innovation. MCX also benefits from a strong and experienced senior management team as well as a highly capable product innovation and development team.
About the company and the issue
Multi-Commodity Exchange of India Pvt Ltd was incorporated on April 19, 2002. The proposed IPO is in the form of an offer for sale of 4 million shares by the promoters and a fresh issue of 6 million shares. Subsequent to the IPO, the promoters' stake in the company will reduce to 26.1 per cent.
On September 26, 2003, MCX received permanent recognition from the Government of India for facilitating online trading, clearing and settlement operations for commodity futures markets across the country. MCX offers trading in 56 different commodities categorised into various market segments such as bullion, energy, ferrous and non-ferrous metals, oil and oil seeds, cereals, pulses, plantations, spices, fibre and others. The company has leadership position in bullion, energy and metals trading in India.
Of the company's total turnover, bullion accounts for 53 per cent, metals for 28 per cent, energy for 16 per cent and agricultural commodities account for the rest. Globally, MCX is the largest silver exchange, second-largest natural gas exchange, third-largest gold, crude oil and copper exchange in terms of number of contracts traded in each of these commodities. MCX was the first exchange to launch futures trading in steel, crude oil and plastics in India. The company has launched weather indices such as RAINDEX - to track the progress of monsoon rains in locations such as Mumbai, Indore and Jaipur - and also trading in carbon credits on the exchange. MCX was also the first exchange to initiate evening trading sessions to coincide with trading on international exchanges such as London, New York and other international markets. The company's initiative to constantly innovate and develop new products is expected to help increase volumes.
For the year ended March 31, 2007, MCX reported a net profit of Rs 930 million on a turnover of Rs 2.0 billion, as compared with a net profit of Rs 375 million and revenues of Rs 1.0 billion in the previous year.
Grey Market - Bafna, Gokul, Anus
Gokul Refoils 175 to 195 14 to 15
Anus Laboratories 200 to 210 35 to 38
Bafna Pharmaceutical 40 6 to 8
Anus Laboratories 200 to 210 35 to 38
Bafna Pharmaceutical 40 6 to 8
Thursday, May 15, 2008
Grey Market - Anu's Laboratories, Gokul Refoils
Gokul Refoils 175 to 195 20 to 25
Anus Laboratories 200 to 210 21 to 23
Anus Laboratories 200 to 210 21 to 23
Wednesday, May 14, 2008
Good news for IPO investors !
Investors no longer have to wait for weeks for refund of their IPO application money.
The application money earmarked for an IPO will now remain in the applicant's bank account till the allotment is finalised, thus eliminating the refund process, SEBI said on Tuesday, addressing a long-standing grouse among investors, particularly in the retail segment.
"The modalities in this regard would be worked out separately," said a news release from SEBI, issued after its Board met on Tuesday.
"The Board approved, in principle, the concept of making lien on bank account as an alternative mode of payment in public/rights issues."
This means that the money marked for the IPO will not be used for any other payment obligation during that period.
At the same time, the applicant will enjoy the interest payable on the amount.
This would also reduce the burden on registrars and merchant bankers. But bankers to the issue can no longer enjoy the floating interest, said officials associated with the IPO process.
Most important of all, investors would not have to wait for their refund money. It also ensures that a liquidity crisis such as that of January 2008 does not occur again.
At that time, many investors were unable to buy scrips which were at attractive lows, as their money was locked up in the Reliance Power and the Future Capital IPOs. Nor could they meet their margin money requirements.
PMs – NO POOLING
The SEBI Board also decided to disallow the pooling of investors' money by portfolio managers.
"Portfolio managers should not float a scheme or pool the resources of the client in a way which is akin to mutual fund activity," said SEBI.
They have been allowed six months' time to convert their operations managed on pooled basis to individual basis.
The Board also decided to enhance the minimum net worth requirement for registration of portfolio managers from the existing Rs 50 lakh to Rs 2 crore in a phased manner.
via BL
The application money earmarked for an IPO will now remain in the applicant's bank account till the allotment is finalised, thus eliminating the refund process, SEBI said on Tuesday, addressing a long-standing grouse among investors, particularly in the retail segment.
"The modalities in this regard would be worked out separately," said a news release from SEBI, issued after its Board met on Tuesday.
"The Board approved, in principle, the concept of making lien on bank account as an alternative mode of payment in public/rights issues."
This means that the money marked for the IPO will not be used for any other payment obligation during that period.
At the same time, the applicant will enjoy the interest payable on the amount.
This would also reduce the burden on registrars and merchant bankers. But bankers to the issue can no longer enjoy the floating interest, said officials associated with the IPO process.
Most important of all, investors would not have to wait for their refund money. It also ensures that a liquidity crisis such as that of January 2008 does not occur again.
At that time, many investors were unable to buy scrips which were at attractive lows, as their money was locked up in the Reliance Power and the Future Capital IPOs. Nor could they meet their margin money requirements.
PMs – NO POOLING
The SEBI Board also decided to disallow the pooling of investors' money by portfolio managers.
"Portfolio managers should not float a scheme or pool the resources of the client in a way which is akin to mutual fund activity," said SEBI.
They have been allowed six months' time to convert their operations managed on pooled basis to individual basis.
The Board also decided to enhance the minimum net worth requirement for registration of portfolio managers from the existing Rs 50 lakh to Rs 2 crore in a phased manner.
via BL
Tuesday, May 6, 2008
Gokul Refoils and Solvent IPO Analysis
Promoted by Balvantsinh Rajput, Kanubhai Thakkar, Mrs. Bhikiben Rajput and Mrs. Manjulaben Thakkar in 1982, Gokul Refoils and Solvent extracts solvents; refines edible oils, castor oils and their derivatives; and manufactures vanaspati.
Besides 680-tonne-per-day (tpd) seed-processing capacity, Gokul Refoil and Solvent has 600- tpd of solvent-extraction, 1,200-tpd of refining, and 200-tpd of vanaspati manufacturing facility. The company gets captive power from four windmills of 1.25 MW each in Kutch, Gujarat. It has also set up a co-generation power plant of 500 KWH at its Gandhidham unit in Gujarat.
To expand the scale of operations and have a global presence, Gokul Refoils and Solvent has set up two wholly owned subsidiaries in Mauritius and Singapore: Maurigo International Ltd and Maurigo Pte Ltd. The Mauritius subsidiary, Maurigo International, is involved in commodity trade on the Chicago Board of Trade and the Malaysia Derivatives Exchange (MDEX),Kula Lumpur, Malaysia. The Singapore subsidiary, Maurigo Pte, procures raw material and trades in commodity. Its strategic presence in Singapore enables it to locally negotiate and deal with the small and fragmented oil suppliers of Malaysia and Indonesia, which will enable the company to procure raw materials at reasonable terms.
Products are marketed under the brand name, Gokul, in Gujarat, Maharashtra, Rajasthan, Madhya Pradesh and Punjab.
Gokul Overseas is a partnership firm manufacturing and processing castor seeds and oil and their derivatives with plant at the Kandla Special Economic Zone (KASEZ). This partnership firm has reported sales of Rs 205 crore and net earning of Rs 8.59 crore in the financial year ending March 2007 (FY 2007).
Consolidated net sales stood at Rs 1323.20 crore and Rs 1563.46 crore in the eight months ended November 2007 and FY 2007. Operating profit margin (OPM) was 6.5% and 3.8%, and net profit Rs 41.83 crore and Rs 25.73 crore.
Standalone net sales stood at Rs 1309.28 crore and Rs 1562.49 crore in the eight months ended November 2007 and FY 2007. OPM was 6.3% and 3.9%, and net profit Rs 37.82 crore and Rs 26.94 crore.
A soya processing plant, with installed capacity of 1500 tpd and capital investment of Rs 51 crore, is proposed at Gandhidham, Gujarat. The existing edible oil refinery at Surat is being expanded to 400 tpd from 100 tpd, with an estimated outlay of Rs 12.31 crore. About Rs 15 crore is to be invested in brand building, Rs 10 crore to increase the warehousing capacity and meet other capital expenditure at existing units, and Rs 60.69 crore to fund part of long-term working capital. Rs 139.59 crore is to be raised at the cap price of the price band, and Rs 38.25 crore will be taken on loan from banks.
Strengths
Versatile manufacturing capabilities, giving extreme flexibility to manufacture all type of oils depending on the market requirement and availability of raw materials at competitive rates.
Weakness
Earnings are vulnerable to changes in the duty differential between crude and refined oil.
The business is characterised by inherently low margin.
Has negative cash flow fof Rs 5.39 crore from operating activity in FY 2007, Rs 21.18 crore in FY 2006 and Rs 18.91 crore in FY 2004.
Primarily present in the bulk market, where there are strong competitive pressures from the unorganised segment.
Valuation
Gokul Refoils and Solvent has set a price band of Rs 175 to Rs 195 per equity share of Rs 10 face value. At the lower band of Rs 175 per share, the P/E would be 7.4x times annualised EPS of Rs 23.8 for the November 2007 ended period and 17.9x times the EPS of Rs 9.8 for FY 2007 on post-issue equity of Rs 26.38 crore. At the upper band of Rs 195 per share, the P/E would be 8.2x times and 19.9x times respectively. In the edible oil industry, the comparable companies such as Ruchi Soya Industries, Gujarat Ambuja Exports, and K S oils have TTM P/E of around 12.6, 9.3 and 21.3, respectively.
via CM
Besides 680-tonne-per-day (tpd) seed-processing capacity, Gokul Refoil and Solvent has 600- tpd of solvent-extraction, 1,200-tpd of refining, and 200-tpd of vanaspati manufacturing facility. The company gets captive power from four windmills of 1.25 MW each in Kutch, Gujarat. It has also set up a co-generation power plant of 500 KWH at its Gandhidham unit in Gujarat.
To expand the scale of operations and have a global presence, Gokul Refoils and Solvent has set up two wholly owned subsidiaries in Mauritius and Singapore: Maurigo International Ltd and Maurigo Pte Ltd. The Mauritius subsidiary, Maurigo International, is involved in commodity trade on the Chicago Board of Trade and the Malaysia Derivatives Exchange (MDEX),Kula Lumpur, Malaysia. The Singapore subsidiary, Maurigo Pte, procures raw material and trades in commodity. Its strategic presence in Singapore enables it to locally negotiate and deal with the small and fragmented oil suppliers of Malaysia and Indonesia, which will enable the company to procure raw materials at reasonable terms.
Products are marketed under the brand name, Gokul, in Gujarat, Maharashtra, Rajasthan, Madhya Pradesh and Punjab.
Gokul Overseas is a partnership firm manufacturing and processing castor seeds and oil and their derivatives with plant at the Kandla Special Economic Zone (KASEZ). This partnership firm has reported sales of Rs 205 crore and net earning of Rs 8.59 crore in the financial year ending March 2007 (FY 2007).
Consolidated net sales stood at Rs 1323.20 crore and Rs 1563.46 crore in the eight months ended November 2007 and FY 2007. Operating profit margin (OPM) was 6.5% and 3.8%, and net profit Rs 41.83 crore and Rs 25.73 crore.
Standalone net sales stood at Rs 1309.28 crore and Rs 1562.49 crore in the eight months ended November 2007 and FY 2007. OPM was 6.3% and 3.9%, and net profit Rs 37.82 crore and Rs 26.94 crore.
A soya processing plant, with installed capacity of 1500 tpd and capital investment of Rs 51 crore, is proposed at Gandhidham, Gujarat. The existing edible oil refinery at Surat is being expanded to 400 tpd from 100 tpd, with an estimated outlay of Rs 12.31 crore. About Rs 15 crore is to be invested in brand building, Rs 10 crore to increase the warehousing capacity and meet other capital expenditure at existing units, and Rs 60.69 crore to fund part of long-term working capital. Rs 139.59 crore is to be raised at the cap price of the price band, and Rs 38.25 crore will be taken on loan from banks.
Strengths
Versatile manufacturing capabilities, giving extreme flexibility to manufacture all type of oils depending on the market requirement and availability of raw materials at competitive rates.
Weakness
Earnings are vulnerable to changes in the duty differential between crude and refined oil.
The business is characterised by inherently low margin.
Has negative cash flow fof Rs 5.39 crore from operating activity in FY 2007, Rs 21.18 crore in FY 2006 and Rs 18.91 crore in FY 2004.
Primarily present in the bulk market, where there are strong competitive pressures from the unorganised segment.
Valuation
Gokul Refoils and Solvent has set a price band of Rs 175 to Rs 195 per equity share of Rs 10 face value. At the lower band of Rs 175 per share, the P/E would be 7.4x times annualised EPS of Rs 23.8 for the November 2007 ended period and 17.9x times the EPS of Rs 9.8 for FY 2007 on post-issue equity of Rs 26.38 crore. At the upper band of Rs 195 per share, the P/E would be 8.2x times and 19.9x times respectively. In the edible oil industry, the comparable companies such as Ruchi Soya Industries, Gujarat Ambuja Exports, and K S oils have TTM P/E of around 12.6, 9.3 and 21.3, respectively.
via CM
Monday, May 5, 2008
Grey Market - Gokul Refoils, Aishwarya Telecom
Aishwarya Telecom 35 10 to 12
Gokul Refoils 175 to 195 15 to 17
Gokul Refoils 175 to 195 15 to 17
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