Emaar MGF, Onmobile Global, IRB Infrastructure, Shriram EPC

 Reliance Power 450 150 to 160


Emaar MGF 540 to 630 45 to 50


J. Kumar Infraprojects 110 Discount


Cords Cable Ind. 135 5 to 8


KNR Construction 170 Discount


Onmobile Global 440 20 to 25


Bang Overseas 207 20 to 25


Shriram EPC 290 to 330 Discount


IRB Infra 185 to 220 70 to 75


Wockhardt Hospital 225 to 260 Discount


Manjushree Extrusion 45 2 to 3


Tulsi Extrusions 80 to 85 9 to 11


SVEC Construction 85 to 95 8 to 10

Wockhardt Hospitals IPO Review

Investors can refrain from subscribing to the initial public offer of Wockhardt Hospitals being made at a price band of Rs 220-260 per share (revised).

Even at the revised offer price, the offer appears expensively valued vis-À-vis sector leader, Apollo Hospitals.

Wockhardt Hospitals is the fourth largest player in the Indian healthcare sector with a presence in western, southern and eastern India.

It plans to scale up its operations to 3,500 beds by 2010, from around 1,400 currently.

Wockhardt Hospitals focusses on tertiary care clinical areas such as cardiology and cardiac surgery, orthopaedics, neurology, urology, nephrology, critical care and minimally invasive surgery.

Wockhardt's current earnings rely significantly on three out of its total of 15 facilities (one hospital in Mumbai and two in Bangalore contributed 69 per cent of income in nine months of FY-07).

Overall, the occupancy rates are at about 57 per cent; with occupancy at some of the facilities set up over the last couple of years yet to pick up to healthy levels.

With the company in a heavy investment phase, investors should expect lower profit realisations and relatively low return on capital in the initial years (7.5 per cent in nine months ended December 2007).

With the reduction in the size of this offer (from Rs 778 crore to Rs 652 crore at the higher end of price band) and aggressive plans to ramp up capacities over the next few years, further debt or equity offerings to raise more capital cannot be ruled out.

At end of December 2007, the company's internal accruals stood at Rs 10 crore, which cannot make up for the shortfall.

Wockhardt Hospitals' current earnings are relatively small; translating into per share earnings of Rs 0.9 (on post-offer equity base) for the nine months of FY2008 ended December 31, 2007.

It currently owns/operates 15 hospitals (1,400 beds), having invested Rs 370 crore in capex in recent years. Plans are afoot to add another 2,127 beds through six brownfield hospitals (operated/managed by company or group companies on long-term agreements with original infrastructure owners) by end-2008 and four greenfield (to be entirely built by company) by end-2009.

Two-thirds of the net IPO proceeds, after deducting issue expenses and corporate purposes, will be used to construct and expand these 10 hospitals.

The remaining sum may be used to prepay short-term loans. Such prepayment, if it materialises, could significantly reduce the high leverage in the balance-sheet (debt-equity ratio, including short-term debt, may be significantly reduced from 3.8 currently).
Performance

Wockhardt Hospitals' network spans ten super-specialty and five regional specialty intensive care unit (ICU) hospitals with an 18 year track record and expertise in minimally invasive surgery (up to 10 per cent of surgical operations performed in FY07).

Wockhardt plans to leverage on these to reduce average length of stay (the turnaround time, which is crucial to realisations) and maintain revenues per bed of Rs 24 lakh per year.

Wockhardt's strategy revolves around garnering in-patient revenues by focussing on areas such as secondary care and advanced tertiary care; both of which have strong growth prospects and potential for high margins. Personnel being critical to hospital business, attrition is a key risk.

However, Wockhardt Hospitals claims a 99 per cent retention rate (last 12 months) for its workforce of 160 full-time specialists. The attrition rate was 20 per cent for resident doctors.

With operating margins of 20.8 per cent in the last nine months, the company's margins are among the highest in the listed hospital space.

The company's ability to ramp up occupancy would be crucial to prospects, as it has greater dependence on its core in-patient business (75 per cent of revenues) for revenue than peers such as Apollo, which has a pharmacy and medical BPO business as well.)

Going forward, a higher reliance on brownfield expansion may provide some relief as brownfield hospitals are typically asset-light and allow a quicker payback period, provided occupancy rates are healthy. Litigation risks to seven of the present and proposed facilities also exist.
Valuation

The company's valuation at an enterprise value (EV) multiple of about 44 times its estimated FY-08 EBITDA (earnings before interest, tax, depreciation and amortisation) appears expensive. Apollo Hospitals, with 7,000 beds under operation and a more diversified profile, commands an EV/EBITDA multiple of around 20 times on FY-08 earnings while Fortis Healthcare enjoys around 42 times.

While Apollo enjoys strong brand equity, Wockhardt Hospitals also enjoys reasonable recognition in regions where it has been in operation for more than 8-10 years.

Given that the company is foraying into Tier-II cities (Madgaon, Nasik, Ludhiana, Jabalpur, Bhavnagar) packaging and pricing may be more important than the brand.

Taking into account the long gestation period in the hospital business and prospects for steady, rather than spectacular growth in earnings, the asking price for the offer appears stiff. It also does not offer any comfort on execution-related risks.

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Emaar MGF Land IPO Review

Investors can consider applying to the initial public offer of real-estate company, Emaar MGF Land (EMGF), but should retain at least a three-year perspective. The company's shares are on offer from February 1-8 at a price band of Rs 540-630 (revised).

Backed by a strong promoter with a global presence, EMGF has swiftly accumulated a solid land bank in India and has demonstrated its marketing abilities through strong demand for its recently launched residential projects. In its targeted pan-India presence and ambitious plans across segments, the company could well be compared to large players such as DLF and Unitech. The drawback would be its lack of track record in the Indian market. Successful execution of its plans would, therefore, hinge on the support from its international parent, Emaar, and domestic partner, MGF. The company now appears to have built a strong base — sufficient land bank, tie-ups with international construction players for project execution and a diversified portfolio with joint ventures in hospitality and infrastructure.

On the company and offer

EMGF is a real estate company incorporated in 2005, co-promoted by Emaar Properties of UAE and MGF Developments. The company is into residential, commercial and retail projects and has plans to foray into hospitality and airport projects. At the higher end of the price band, the offer would raise about Rs 6,400 crore to be utilised towards land acquisition, construction cost and loan repayment. Post-listing, the market capitalisation would be Rs 53,000-62,000 crore.
Strong promoter background

EMGF's promoter, Emaar Public Joint Stock Company (Emaar), is an international real estate player with a presence spanning Saudi Arabia, UAE, Egypt and the US. Emaar PJSC is building the world's largest tower and Mall in Dubai and is also involved in the prestigious King Abdullah Economic City in Saudi Arabia.

Apart from skill sets and cash infusion of over Rs 3,000 crore into EMGF, Emaar brings to the table an ability to forge business and funding ties. This lends confidence on two key success factors — execution capability and meeting fund requirements. Emaar's interest in this venture is also evident from the agreement to route all its Indian projects only through EMGF.

MGF Developments, the other promoter, specialises in retail space and has an established presence in North India, with local knowledge to handle issues such as land identification, procurement and dealing with local procedures. That the company has managed to add 13,024 acres to its land reserves in a short span of time — a high proportion of it also being fully paid — suggests that the local partner's knowledge has played a pivotal role.
Comfort from land holding

As much as 89 per cent of EMGF's land reserve is fully paid, thus locking in to prices; reducing risks of escalation in prices at a later date. This proportion is higher than Emaar's peers in the listed space. Though the land bank is spread across regions, the north accounts for 75 per cent. This probably arises from the MGF's strength in the region and suggests caution in testing new waters.
Buoyant take-off

EMRF has already made available for sale about 80 per cent of the 17.3 million square feet of residential projects under development. This provides comfort on the company's execution capabilities, given that it otherwise lacks a track record in the country.

Of the total developable area of 566 million sq ft., residential segment accounts for over 75 per cent with about 15 per cent in commercial and the rest planned for retail and hospitality.

The focus on residential appears appropriate for two reasons. The demand for residential area is expected to be higher than the other segments over the long term. This would also enable the company to cash-in on projects, replenish the land bank and move ahead to other projects. This build-sell model prevents locking-in of capital. However, projects coming up over 2008 and 2009 are tilted towards the commercial and retail space, with plans to adopt a lease model.

This strategy appears to be targeted at building a high-grade asset basket, targeting Real Estate Investment Trusts (REIT). Even if EMGF is able to complete 50 per cent of the targeted 89 million sq ft of commercial space, it could garner a sizeable share of the REIT market.

In the residential segment, the company has chosen a strategy of 'integrated master planned communities' (similar to the integrated township concept) in many Tier-II and Tier-III cities.

This provides flexibility to the company to sell plotted land or full fledged housing, depending on the response in these areas. The sale of plotted land would also aid regular infusion of cash to meet working-capital requirement.

The strategy appears well thought out, as it may result in regular cash infusions, while building a portfolio of income-yielding assets.
Sound joint ventures

EMGF has used international joint ventures to access technology, and make up for lack of experience in dealing with local contractors. Exclusive tie-ups with Australia-based companies, Leighton International and Multiplex, and the US-based Turner Construction are cases in point.

The company has also formed a consortium with Dubai Aerospace Enterprise to venture into opportunities in port privatisation, modernisation and management in India. Given that this segment in the infrastructure space has just taken off in India, the move to focus on it appears well-timed.

The company's foray into hospitality is supported by tie-ups with the Hyatt, Accor, Marriot and Four Seasons.

While the JV is desirable, we are cautious about prospects for up-market and luxury hotels in places such as Kolkata, where attractive pricing may remain a key.
No cheap valuations but..

EMGF has managed to break even within two years of incorporation; profits for the half year-ended September 2007 fully offset the earlier losses. Consolidated revenue for the half year stood at Rs 473 crore, while net profits were Rs 130 crore.

We conservatively estimate revenues crossing Rs 3,000 crore by FY-09 with per share earnings close to Rs 10.

This estimate does not factor in earnings from the hospitality segment and the leased commercial and retail spaces. The latter, especially, could provide significant upside to the earnings estimate.

EMGF's operating and net profit margins for the half-year ended September 2007 stood at 39 per cent and 27 per cent respectively. This compares well with the industry average but is slightly lower than the leading players.

A recently accumulated land bank may explain the lower margins. This factor may see more steady margins on the company's projects compared to peers, as the latter may witness contraction as they move over to recently replenished land reserves.
Risks

We are concerned about a chunk of EMGF's present projects being concentrated in Mohali. While purchasing power in this location no doubt remains high, the market is yet to be tested for projects of such huge scale. Risks of excess supply also remain high.

As is the case with most other big players, Emaar's targets for development appear aggressive given that no player has so far proven such capabilities.

While Emaar has a good track record, the size of total projects executed so far is only about 50 million sq ft (although huge developments are under way) across the world.

IRB Infrastructure Developers IPO Review

Investors with a long-term outlook can subscribe to the initial public offer of IRB Infrastructure Developers. A good track record in the build-operate-transfer (BOT) space, early-mover advantage in running toll roads and in-house capabilities in construction, road maintenance and toll collection suggest strong growth potential for this infrastructure company.

The offer price of Rs 180-220 appears stiff and the current market correction has provided an opportunity to enter a number of blue chips at reasonable valuations. We would, therefore, be comfortable recommending an 'invest' at the lower end of the price band. Our conservative estimate of the consolidated per share earnings for FY 2009 on the post offer equity base works out to Rs 3.1.

This is, however, without factoring in any increase in toll charges and traffic for the toll roads operated by the company, or revenues likely to flow from the company's real-estate venture.
Background

IRB Infrastructure Developers is primarily a holding company with wholly-owned subsidiaries, which are engaged in road and highway construction and maintenance. The group is at present involved in 12 BOT projects out of which 11 are in the operational phase (with maintenance and toll collection being done by the group). The company also plans to foray into real-estate . IRB plans to raise about Rs 100 crore to invest in one of the subsidiaries and also repay its own loans and that of its subsidiaries. Post-listing, the market capitalisation of the stock would be Rs 6,000-7,000 crore.
Early bird

The toll model is normally considered risky, although the revenue potential is high if the project attracts high traffic. Being one of the early private players in the space, IRB has managed to negotiate lucrative business terms that have compensated for risks associated with the toll model.

For one, IRB's existing BOT projects do not have any toll-sharing arrangement with the Government. With high-traffic segments such as the Mumbai-Pune Expressway, part of NH-4 and Pune-Nashik road in its portfolio, IRB is likely to enjoy a high internal rate of return on its projects compared to peers who have more recently entered the segment and have thus settled for less attractive terms.

While the current basket of 12 BOT projects would enjoy superior profitability, new bids may see relatively muted returns with the Government now actively looking at toll-sharing models. .

Two, the company has non-compete clauses in some projects, which would restrict the Government from building or operating any competing BOT projects that could possibly reduce the toll inflows for the company. Similarly, control over projects such as the Mumbai-Pune Expressway as well as the Mumbai-Pune portion of the NH-4 corridor (both under IRB's purview) ensures that the company does not face any competition from adjoining corridors.

Three, the company may benefit from periodic hikes in toll rates, some of which may be significant if traffic numbers are encouraging. For instance, the Mumbai-Pune Expressway is likely to command 18 per cent increase in toll rates the coming year.

The above factors suggest that the timing and locational advantages of the existing portfolio may endow IRB with a clear edge in the toll road segment.
Pre-qualification and integration

While IRB's operations have been concentrated in Maharashtra and Gujarat, its experience in BOT has earned it pre-qualification by NHAI in NHDP Phase V projects in other States such as Tamil Nadu, New Delhi and Uttar Pradesh. Additionally, IRB's operations appear well integrated, with capability to build and maintain roads as well as manage toll collection. This integration reduces the need to outsource work, which, in turn, results in higher profit margins.

IRB's order book as of October 2007 stood at Rs 2,325 crore. While this would convert to revenues over 2008-2010, we expect toll revenues (not included in the order book) to be the most significant revenue driver. Income from BOT projects (predominantly toll revenues) accounted for the largest chunk of the recent consolidated revenues of the company .

IRB posted consolidated sales of Rs 262 crore for the five months ended August 2007 and net profits after minority interest of Rs 24 crore. The reported numbers may not be indicative of the company's future revenues for two reasons. Revenues of fully controlled subsidiaries have been only partly captured in the August 2007 financials, because of recent consolidation.

Two, a few other subsidiaries have also been consolidated post August 2007; and these have not been accounted. The recent consolidation is positive because earnings that would have otherwise accrued to special purpose vehicles (SPVs) will now directly accrue to the fully-owned subsidiaries.

As most of the projects under the subsidiaries are operational, risk of funding also appears minimal.

IRB and its subsidiaries carry high levels of debt. While repayment from the offer proceeds would reduce the debt, newer projects and a foray into real-estate could require further raising of funds.

IRB plans to venture into real-estate and has acquired 925 acres of land for building a township in Pune district. With its hands full in the infrastructure space, we are cautious about its capability as a real-estate developer. The offer closes on February 5.

Reliance Power has most number of shareholders

Anil Ambani Group's Reliance Power has become the country's biggest company in terms of number of shareholders following the allotment of shares in its recently completed Rs 11,560 crore initial public offering.

Reliance Power, whose IPO ended on January 18 with a huge demand worth over Rs 7,50,000 crore and over-subscription of 73 times, has close to 42 lakh shareholders, the company said today after allotment of shares under the public issue.

This shareholder base is bigger than any other company currently listed on Indian stock exchanges, according to the shareholding data filed with the bourses.

Reliance Power has taken over another group company, Reliance Natural Resources Ltd (RNRL), in terms of number of shareholders.

According to the latest information available with stock exchanges, RNRL had close to 22.3 lakh shareholders at the end of December 2007 quarter, followed by Mukesh Ambani-led Reliance Industries with close to 20.6 lakh shareholders.

Interestingly, seven top companies in terms of the number of shareholders belong to either of the groups led by two Ambani brothers.

While the top two companies -- Reliance Power and RNRL belong to Anil Ambani Group; the third largest, RIL, and fifth largest, Reliance Petroleum (RPL) belong to the Mukesh Ambani group.

Anil Ambani Group's Reliance Communications is the fourth largest with a shareholder base of about 19.8 lakh. RPL had close to 16.9 lakh shareholders as on December 31, 2007.

Besides, Anil Ambani Group's Reliance Energy and Reliance Capital are sixth and seventh largest with 15.4 lakh and 12.5 lakh shareholders respectively.


Reliance POWER IPO Allotment can be checked here (Its delayed, Expected today )