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The issue was oversubscribed a whooping 65 times creating a history in the IPO market. QIB section got oversubscribed by 115 times. Retail portion got oversubscribed by 7 times.
As per unconfirmed sources, the IPO grey market is putting a premium of Rs. 25 on the offer price of Rs. 52. We will discuss the listing strategy in detail once the listing date is finalised. Read More!
Supreme Infrastructure has entered the capital markets with an offer of 34.75 Lac shares at a price band of Rs. 95-Rs. 108. Investment Guru is of the view that the company's business model of integrated construction setup has worked well and has enabled it to garner higher margins in an otherwise low margin business. There are few factors such as over-dependence on government projects and inexperience in the construction of office spaces which are relatively dark areas. However, the company has priced its IPO very modestly and investors in the IPO can expect good listing gains. Given its entry in the construction of IT parks and related areas, the stock would be worth watching from a medium term perspective.
About the Company
- Supreme Infrastructure is a medium sized Company in the infrastructure sector and is engaged in construction of Roads, Highways and widening of Highways.
- The company owns and operates a Ready Mix Concrete (RMC) Plant (powai) for captive consumption and also for sale to other parties.
- It also owns and operates Asphalt Plants (Bhiwandi and Powai) for captive consumption and also for sale to other parties and Wet Mix Plant for captive consumption
- The company operates crushing Plant (near Thane) for crushing the stones / boulders into aggregates to be used in the building and road construction.
- Supreme Infrastructure has completed 56 projects valued at Rs. 198.77 Crores till July 31, 2007.
- The IPO proceeds would be used for purchase / upgradation of Plant and Machinery and Long term working capital requirements.
- A profit making company for last 10 years.
- The Company is well equipped to handle large orders and is registered as a Class “I” by PWD and as “A” Class contractor by Bombay Municipal Corporation and Public Works Department as Class “I” Contractor and entitled to bid for and accept Works and Orders as per its bidding capacity.
The New Venture
- The company plans to foray into the real estate business by undertaking the construction contracting activity. The promoters of the company have incorporated a separate company by the name of Supreme Housing for real estate development business.
- Supreme Housing and Hospitality Private Limited proposes to develop an Information Technology Park followed by residential complex in Powai area. The area to be developed as information Technology Park would be approximately 4,90,000 square feet and the area to be developed as residential complex would be approximately 5,71,000 square feet. The residential complex will be developed under the Slum rehabilitation scheme . The work for development of information Technology Park is expected to commence by March 2007.
Financials and Valuations
- Company Top line grew from mere 8 crores in FY03 to 96 crore in FY07. Net profit grew from 12 Lacs in FY03 to 12.75 Crore in FY07.
- EPS for Year ended FY07 stood at 12.66. Post Issue EPS works out to be Rs. 9.2. The offers comes at a P/E of 11.7 on the upper price band.
- Return on Networth stood at 32% for FY07.
- Net Asset Value as of 30th June stood at Rs. 43.64 (Pre-issue).
- Competitors like MSK Projects and Tantia Constructions are quoting at a P/E of 14.
Issue Opens : 21-Sep-2007
Issue Closes : 26-Sep-2007
Registrar : Bigshare Services
For Allotment status of Supreme Infrastructure IPO, Click Here
Forthcoming IPO's : Saamya Biotech, Maytas Infra, Circuit Systems.Read More!
Looks like India is going through a very good phase. On one hand our cricketers are showering fours and sixes and delivering amazing performance at the world cup, on the other hand the stock markets are flaring up with sensex hitting all time high of 16616 with superstars like Reliance hitting every ball for a six !!! whatever, the game has taken an intresting turn, be it cricket or the sensex. So what's next ? Will our cricketers win over the australians ? will sensex post a new high on monday ?
We should all thank Mr. bernanke , the US Fed chief for a 50 basis point rate cut which brought cheers to markets across the globe. Markets are now expecting RBI to announce a rate cut ! Fed's decision is being seen as a helping hand to the ongoing subprime crisis. On the Indian markets, this would ensure flow of funds to indian markets and hence liquidity would continue to be a driving factor for the markets.
Reliance stocks in the thick of action
The person who been benefitted most from the upturn in the stock market is undoubtedly the Ambani brothers and of course the Reliance Shareholders. Share of all reliance group companies posted impressive gains.
I remember giving the Investment idea on Reliance Industry @978 in May last year (See the post Here) with a One year target of 1800 and since then the stock has lived up to the expectation of the investors. I would recommend invetsors to keep a hold on the stock as it unfolds it journey to new horizons. Reliance has recently announced its foray in highly lucrative shipbuilding and dredging sector.The company has anoounced oil finds in D4 block in Krishna Godavari basin. Company Infrastructure arm Reliance Industrial Infrastructure has been in the limelight for last few session and has moved to 1043 backed by continous buying support.
Reliance group stocks were in continous demand in the market. Reliance Natural Resources surged 35% to end at Rs. 76. It has applied for a license to undertake city gas distribution business in Delhi, Mumbai, Gurgaon and Noida. Reliance petroleum was up 11 % on huge demand. Punters are putting a target of Rs. 200 on the stock within 6 Months.
Kuotons and CCCL gets huge subscription
Both the IPO's were considered to be aggressively priced and see the subcription numbers ! Kuotons was subscribed 45 times while CCCL was subscribed whooping 81 times. This shows the craze to earn listing gains among the investors and why not , if a stock like Magnum Ventures can give 85% return on lsiting day, Kuotons and CCCL will follow suit and going by the trails they may also have a blasting debut on the bourses. As per unconfirmed sources, Kuotons is commanding a premium of Rs. 100 in the Grey market and CCCL is commanding a premium of Rs. 250 The figures may go further up after the news of oversubscription. Another IPO on the block is Supreme Infrastructure. An update on this IPO will be posted shortly on the blog. Read More!
Company : Consolidated Construction Consortium Ltd. (CCCL)
Sector : Construction / Engineering
Shares Offered : 37 Lac
Price Band : Rs. 460 – 510
CCCL is a good mix of play on construction and engineering space. Investment Guru is of the view that the company has good growth potential given the visibility into its earnings based on 2000 crore order book, good management pool and its move towards high margin businesses. However, the IPO has been priced quite aggressively and the quantum of listing gains depends on the state of markets at the time of listing. Investment Guru expects moderate listing gains on listing.
- Ability to provide integrated turn-key construction services to clients operating in diversified sectors
- Scheme of concentric integration: CCCL has the key competencies and in-house resource to deliver a project from its conceptualization to completion. The company believes that this has been one of the important contributing factors to successful completion of a number of projects in a timely manner, without compromising on quality.
- Ability to execute innovative and complex structures
- Qualified experienced and proven management team
- The company’s operations are concentrated in Southern part of India. 92.50% of the Order Book as of July 31, 2007 and 92.2% of revenues for Fiscal 2007 are from projects located in the south of India. Further to this even in South they are concentrated in the states of Tamil Nadu and Karnataka. Hence the company lacks geographical diversification.
- The company does not owns the CCCL brand, it has licensed by one of the promoter’s group company. The company pays 4% of profit to this company (maximum Rs. 2 Crore) for using the logo.
- The company has generated negative cash flows from operating activities for last three years.
Company’s Topline has zoomed from 126 crore in year 2003 to 868 Crores in year 2007. Bottom line has also soared from 3 crore in FY03 to 47 crore in FY07. In last 4 years, the company’s sales have grown at a CAGR of 76% while the profits has grown at a CAGR of 126 %.
For FY07, the EPS post the bonus issue stood at 14.88. Return on Networth is 23.27%.The Net asset vale per share comes to Rs. 55.84. At the higher price band the issue comes at a PE of 34. Peer B.L. Kashyap is quoting at a PE of 24.
This Issue being has been graded by ICRA Limited as IPO Grade 3 indicating average fundamentals.
Issue Opens : 18-Sep-2007
Issue Closes : 21-Sep-2007
Registrar : Karvy
To check IPO Allotment status of CCCL click Here
Koutons Retail has entered the capital markets with an offer of 35.24 lac equity shares at a price band of Rs. 370 -415. Investment guru is of the view that the company has taken advantage of the retail growth story of India and has been able to deliver excellent growth with a viable business model. The future holds good for the company and the IPO proceeds would be used for expansion plans to fuel company growth engine. At the same time the company has priced the issue quite aggressively. However, given the growth rate in Topline and bottomline, and future expansion plans , and due to low float available to public, the stock would be bound to offer smart listing gains to the investors.
The Organized Retail story
The Indian retail sector is at an inflexion point with economy growing at 7-8%, favourable demographics, rising consumer incomes, real estate developments like emergence of new shopping malls and changing lifestyles that bring the Indian consumer closer to the consumers in more developed markets. All these changes are driving growth of organized retailing.
India is the second fastest growing economy in the world, where currently the retail market is valued at USD 270 billion. Food and grocery is the dominant sector followed by clothing, textiles and fashion accessories. Organised retail has been growing at a CAGR of 30%. Apparel and accessories retailing is the largest segment of organized retailing in India, constituting 39.0% of total organized retailing business, which is valued at approximately Rs. 550.0 billion (USD 12.4 billion). The rise of Mall culture in urban India has been a boon for the apparel sector and has the trend is fast catching up in smaller cities. The potential is huge.
About Koutons India
An integrated apparel manufacturing and retail company in India. The company is in the business of designing,manufacturing and retailing apparel under the “Koutons” and “Charlie Outlaw” brands through a network of 999 exclusive brand outlets (as of August 20, 2007) across India.
The company has 18 in-house manufacturing/finishing units and 14 warehouses which are spread across various locations in and around Gurgaon. The company has increased annual manufacturing capacity from 6 Lac pieces of apparel in 2005 to 1.24 Crore as of March 31, 2007
The “Koutons” brand has been core to the success of the company. Sales from brand “Koutons” has increased from Rs. 516 million for 2005 to Rs.3,727 million for 2007 and has contributed 99.11% and 92.34% of total income in fiscal 2006 and 2007, respectively.
Koutons brands caters to middle and high fashion segment and offers a complete range of men’s wardrobe. The company has also relaunched its old brand “Charlie Outlaw” targeting the youngsters.
The company adopts three tier retail model to market its products. It has Company owned and company operated stores, Company owned and Franchisee operated stores and Franchisee owned and Franchisee operated stores. At present the majority (858) outlets are franchisee owned and operated. 124 outlets are company owned and franchisee operated while only 17 outlets are under company owned and operated model. The focus is on increasing in company owned and operated stores.
Koutons is an intergrated player as its operations cover manufacturing to retailing processes. The scale of operations helps the company to enjoy higher operating margins.
Company enjoys high brand visibility and this helps it to maintain the growth rate.
The company is bringing diversification in its retail model from franchisee based to Company owned and operated stores. This will improve profitability in long term.
The company is also moving from men’s range to complete family range of apparels. This would provide drivers for future growth.
Aggressive growth of the company has led to higher inventory levels which in turn increases the working capital requirements.
The company is dependant on brand “Koutons” for its sales. Inability of company to maintain the brand image could lead to slower growth in sales and profitability
The franchisee model has its own pitfalls and company’s overdependence on this model may be a risk factor. Also the entire inventory risk in the franchisee model is borne by the company.
Object of the Issue
The issue proceeds would be utilized in setting up exclusive brand outlets and new manufacturing facilities
Financials and Valuation
Income has grown from Rs. 581.46 million in fiscal 2005 to Rs. 4,036.17 million in fiscal 2007, at a CAGR of 163.5% and our profit after tax has increased from Rs. 19.29 million in fiscal 2005 to Rs. 344.87 million in fiscal 2007, at a CAGR of 322.8%.
For the year ending 31st March,2007, the EPS stood at 14.22. The average return on networth is 21.2%. Net asset value per share is Rs. 59.49.
On post issue equity, the EPS works out to be 11.3. At the offer price of Rs. 415 the issue comes at a PE of 36.8 which makes it a aggressively priced issue. Peers like Kewal Kiran and zodiac are quoted at a PE multiple of 16 and 19 respectively.
Issue Opens: 18-Sep-2007
Issue Closes: 21-Sep-2007
Check IPO Allotment Status of Koutons Here Read More!
Powergrid Corporation has entered the capital markets with a public offer of 57.39 Crore equity shares at a price band of Rs. 44-52. The company intends to raise about Rs. 3000 crore at the higher band. Investment Guru is of the view that the company has good growth potential given the thrust on power sector reforms and its importance in the growth of the economy. The issue is priced reasonably and offers scope for listing gains.
Hightlights of the IPO :
- Power Grid is into the business of Power transmission. (In Year 2007, it transmitted approximately 298 billion units of electricity, representing nearly 45% of all the power generated in India)
- The company has completed 101 transmission projects and schemes valued at Rs. 251.81 billion. As at June 30, 2007, it had 45 transmission projects in various stages of implementation.
- The Company plan to spend Rs. 550 billion towards investment in transmission projects during the GoI’s Eleventh Five Year Plan
- The company also provides transmission related consultancy services.
- The company has also diversified into Telecom Business by creating a telecommunications network principally using its overhead transmission infrastructure.
- It own and operate a fibre-optic cable network over 19,000 kilometres long and connected over 60 Indian cities, including all major metropolitan areas. The company has been leasing bandwidth on this network to more than 60 customers, including major telecom operators such as BSNL,VSNL, TTSL RCOM and Bharti.
- The net proceeds of the Fresh Issue shall be utilized for 15 identified transmission projects of the Company
- The company's Topline has grown at a CAGR of 13% over the last 5 years. For FY07, PGCIL clocked a Topline of Rs. 40.8 Billion and PAT of 10.8 billion. For the Q1 ended June,30 the Topline was Rs. 10.5 Billion and a PAT of Rs. 4.5 Billion backed by savings in Interest and Finance Charges.
- Weighted average EPS for the last three years stood at Rs.2.85. The annualised EPS based on first quarter's EPS comes to Rs. 4.76
- The retrun on Networth comes to 10.16 %
- Net Asset value of company's share comes to Rs. 29.18 per share.
- There are no listed peers per the prospectus.
- Major part of the Revenues is derived from the transmission of power to the State Power Utilities and many of these entities have had weak credit histories in the past. This may impact performance of PGCIL.
Issue Opens : September 10th, 2007
Issue Closes : September 13th, 2007
Registrar : Karvy Computer Share
Company Website : Click Here
Check Allotment Status of Power grid IPO Here
Wow! It's a great feeling to be back on the blog after a gap of more than one month. First of all thanks to all the readers of the blog who have showed tremendous faith in the blog and have been kind enought to wait patiently for updates on the blog. I am penning this post from myhometown Jaipur. I arrived here on Saturday afternoon and the city welcomed me with a scanty shower that changed the mood of the climate. Today also we witnessed a short span of showers and cool breeze was blowing. Jaipur , as always, has been close to my heart and every time I come here I make plans of settling here, sooner or later. I am sure I am going to write a great chapter in my career soon and when I do that most probably I would be based at Jaipur. I am not going to open the cards further and frankly these are just some thoughts that come to my mind . I need some hard core planning to convert this into action. Well, lets leave this apart for now and turn to our all time favourite .....yeah...of course...the Great Indian Stock Markets......As I am writing this post , there are few questions in my mind which I am and probably all the readers are trying to find answers to.
- Where is the sensex headed ?
- Will global factors continue to impact our matkets ?
- What about impact of recent political developments?
- How is the Indian economy placed and its impact on markets ?
- Markets have recovered recently from lower levels ? have I missed the rally...should I buy now or wait for a fall ?
- Should I put my money in bluechips or Midcap stocks ?
- Which sectors are expected to perform better in coming quarters ?
- Will markets go up till diwali and then fall ?
- What is the FII mood on Indian stocks ?
- How will the IPO's do in the coming months?
- Can sensex touch all time high this year again ?
The list is not ending ....so let's put a brake and try to explore what the markets hold for the future.
The Bounce Back
Investors were trying to forget the jerks of March 2007 as the markets pulled back smartly from there to create a life time high, however the month of July brought another shocks in form of Sub prime crisis and clouds of uncertainty over domestic political uncertainty. Indian markets got glued to the global markets and to add to the woes came the political drama over the Nuclear treaty with US. It looked as if the things have come to an halt and the bull run is over. However, the markets again took an U-turn and recovered to a greta extent backed by buying at lower levels and assurance from US govt that sub prime lenders would get relief.
Global Markets would continue to Impact
The sub prime fear is far from over and looks like it will continue to haunt the US as well as asian markets for time to come. For those readers who are not aware of what sub prime crisis, I would put it simply as defaults by borrowers of loans with changes in interest regime. The US housing markets had witnessed tremendous growth in numbers of defaulters on home loan borrowings especially to the segment where the quality of borrowers was not good and hence the chances of default are more. You can read more on Subprime Crisis on Wikiepedia.
Can Sub prime crisis happen in India ?
Given the sharp surge in real estate prices and hardening of Interest rates and given the way the property market is growing on the financing options available, we can say Indian is not immune to sub prome crisis. Howevever, we are in the eraly stages of the cycle and the real impact would be known in the coming 3-4 years.
Political Concerns - Roadblock to reforms
The question is not limited to whether left will pull out the support to the UPA government or whether the Indo-US Nuclear deal will go through or not . A bigger concern is that will the government be able to take the reforms path forward without any roadblocks ? geberal perception is that, even though the government may eventually save its seat, it will have to put the reforms on back burner while doing so. Political concerns or in other words the overruling of politics over economics will prove to be a dampner on the moods of the market.
FII's ...will they buy or sell ?
Well they are in the business of earning money through stock markets and they do indulge in profit taking at times. However, I do not think that FII's would leave the immense opportunity that India as a growing economy offers to the Investors. If we see the investment pattern of the FII's in the last 6 months, we would find that FII's have been net buyers in 5 out of the 6 months. So who say's they are running out. I believe that FII's would continue to pour money in India and keep booking profits too as and when they find an opportunity. Overall, FII interest in India would continue.
Indian Economy - On the growth Track ?
Indian economy grew at the rate of 9.3% for the quarter ending June ,2007. As per the Central Statistical Organisation manufacturing sector grew at 11.9 per cent, ‘electricity, gas & water supply’ at 8.3 per cent, ‘construction’ at 10.7 percent, ‘trade, hotels, transport and communication’ at 12.0 per cent, ‘financing, insurance, real estate and business services’ at 11.0 per cent, and ‘community, social and personal services’ at 7.6 per cent. The growth rates in ‘agriculture, forestry & fishing’ and ‘mining & quarrying’ are estimated at 3.8 per cent, and 3.2 per cent, respectively during this period.
This shows that we are moving steadily towards the target of 10% growth, but again one has to watch the political development which may result in slowdown in the growth.
Also we need to fast takeover our neighbour China, whose economy is growing at a scorching pace of 11.3%.
Blue Chips Vs. Midcaps
Well that's a tough question and one needs to take a call based on individual investing pattern and risk apetite. Blue chips on one hand provide steady growth with more stability during the downturns, Midcap stocks offers skyrocketting returns which can turn into earth shaking tremors as well in times of downtrend. I would advice a mix of both. An average investor should have 60% blue chip exposure and 30-40 % midcap exposure to get a balance in the portfolio, but again it depends on individual investment needs and objectives.
The Outperforming Sectors
Capital goods, Private sector Banks, Cement, Financial Services and chemical and fertliser space looks good from sector perspective. IT would continue to be underperformer for some more time until investors get a clear picture on how these companies tackle the stromg rupee and manage to grow at higher pace.
IPO's continue to delight
The performance of recently listed IPO's gives us a feeling that good IPO's would continue to shower money on the investors and bad IPO's would be punished irrespective of the sensex levels. Hence, Investors would do well to invest money only in good IPO's.To summarise, the outlook on the Indian Stock market is cautiously optimistic. One should understand that there are factors that can pull the markets down. However, as I always say, long term investors would always be winner. Short term investor will need to keep themselves abreast of global as well as domestic developments. Stock specific stories would continue to rule the markets. Read More!