December 2012

Bharti Infratel IPO – Analysis ~ P/E on higher side ~ No Comparables ~ Better to wait

Bharti Infratel IPO Analysis, Stocks Analysis, Investing, Listing, INdian Stocks IPO, Upcoming Stocks

Bharti Infratel is coming out with a 100% book building, initial public issue of 188,900,000 equity shares of Rs 10 each, in a price band Rs 210-240 per equity share.

Up to 50% of the issue will be allocated to Qualified Institutional Buyer (QIBs) including 5% to mutual funds, further 15% to non-institutional bidders and the remaining 35% for the retail investors.

The issue will open for subscription on December 10, 2012 and will close on December 14, 2012.

Bharti Infratel along with Indus (a joint venture with Vodafone India and Idea Cellular) is one of the largest tower infrastructure providers in India, based on the number of towers that Bharti Infratel owns and operates and the number of towers owned or operated by Indus. Having a nationwide presence with operations in all 22 telecommunications Circles in India.

The telecom tower business largely depends on telecom operators. Bharti Infratel and Indus have MSAs with the leading wireless telecommunications service providers in India. With the number of telecom operators revenues affected due to the cancellation of 122 telecom licences in February this year, has resulted in a fall of about 30,000 tenants. But When the telecom services sector does well, then the tower sector also does well, but when the services part is not doing well, the tower sector is largely still assured of its revenues due to long-term contracts.

However, the company’s business is highly dependent on factors affecting the wireless telecommunications industry in India, particular the growth of their key customers.

Further the tower infrastructure business in India is highly competitive in nature and apart from the established players like reliance Infratel the company faces competition from independent tower infrastructure companies including service providers such as GTL Infrastructure. Also the business is operations get affected by various regulatory measures with respect to tower sharing among wireless telecommunications service providers. There is another concern, Indus – a joint venture with Vodafone and Idea and operating a joint venture often requires additional organizational formalities as well as time-consuming procedures.

It is the first telecom tower company to enter the capital market and will be the biggest IPO since that of Coal India’s two years ago.

CRISIL has assigned IPO grade of ‘4/5’, indicating above average fundamentals to the Initial Public Offering of the company.

The issue comprises a fresh issue of 146,234,112 equity shares by the company, and an offer for sale of 42,665,888 equity shares by four of its shareholders, including Temasek and Goldman Sachs. The issue will constitute 10 per cent of the post-issue paid-up equity share capital of the company. Bharti Airtel, which owns about 86 per cent of Bharti Infratel, is not selling any shares but this issue will result in 10% equity dilution in the company and reduce Bharti Airtel’s stake in the subsidiary from 86.09% to 79.42%. The issue has been offered in a price band of Rs 210 -240 a share, based on the EPS of 4.31 for the Year Ended March 31, 2012 the P/E at the lower price band comes to 48.73x, while it comes at 55.68x, as there are no listed companies in India that engage in a business similar to that of the Company.

The issue proceeds will be used for setting up 4,813 new towers, at an estimated cost of Rs 1,087 crore, while up gradation and replacement of existing towers would require Rs 1,214 crore and green initiatives entail a cost of Rs 639 crore. The company is going for all modern methods and plans to reduce dependency on conventional fuel for powering its towers by switching to renewable energy sources at several remote locations.

The issue appears overpriced, at these levels. However, there are no comparables and though there was a lull in the business after the cancellation of 122 telecom licenses early this year, but with refarming and fresh auction of spectrum, and more clarity in policy, investments are likely to return to the sector after battling regulatory uncertainty and weak investor sentiment for more than a year.

Investors can wait for the listing to happen and see how the market reacts, and if possible get the stock at a discount.

The financials are given below (in Rs Millions)

Particulars Mar 2012 Mar 2011 Mar 2010 Mar 2009
Net Sales 41581.60 28408.77 24530.30 26241.66
Total Income 42692.20 29298.13 29297.77 28662.74
PBIDT 17478.20 19531.89 17417.72 16383.11
PBT 6839.80 4895.32 3208.19 4374.42
PAT 4474.40 3481.90 2054.95 2963.38
Reserves 140303.40 132532.58 130199.12 98854.82
Net Worth 146111.40 138340.61 136007.15 104259.82
Total Debt 0.60 0.00 6000.00 41341.25
ROCE 4.79 3.74 2.68 3.46
RONW 3.15 2.54 1.71 2.87
PATM(%) 10.76 12.26 8.38 11.29
CPM(%) 36.32 62.51 63.64 55.27
CEPS 26.00 30.57 26.88 26.84

CARE (Credit Analysis & Research) IPO Analysis

CARE (Credit Analysis & Research) IPO Analysis , Review, Stocks, Investments, Indian Stock Markets,

Credit Analysis & Research has come up with a public issue of 7,199,700 Equity Shares of Rs 10 each in a price band of Rs 700-750 per equity share to raise up to Rs 540 crore.

The issue opens on Dec 07 2012 and closes on Dec 11 2012.

Credit Analysis & Research (CARE) is a second largest full service credit rating company in India, offering rating and grading services across a diverse range of instruments and industries including IPO grading, equity grading, and grading of various types of enterprises, including shipyards, maritime training institutes, construction companies and rating of real estate projects, among others.

The company with over 19 years of experience in rating debt instruments and related obligations covering a wide range of sectors, has rating relationships with 4,644 clients. CARE’s established presence in rating debt instruments and bank loans and facilities, domain experience across a range of sectors such as manufacturing, services, banks and infrastructure, strong rating credibility and brand presence along with strong financial position and profitability are its major strength.

On the flip side, the company’s dependence on its rating services business could be considered risky. However, given its diversification plan involving several risks, may lead to losses or lower returns from such activities. Further, migration to internal rating based approach for credit risk could have negative impact on results of operations and revenues of the company. Moreover, given the financial services industry that the company operates in, it may also run high on the risk of retaining key personnel, along with the risk of its limited experience in markets outside India.

Credit Analysis & Research has come up with a public issue of 7,199,700 Equity Shares of Rs 10 each in a price band of Rs 700-750 per equity share to raise up to Rs 540 crore. The company will not be receiving any proceeds from the Offer, and all proceeds shall go to the Selling Shareholders. Based on the EPS of Rs 40.52 for the year ended March 31, 2012, the P/E at the lower end of the Price Band comes at 17.28x and at the higher end of the Price Band it comes at 18.51x, while its competitors are ICRA and CRISIL trading at TTM PE multiple of 24.80x and 37.80x. The company is second largest rating agency in the country and has witnessed 40 per cent growth in profits and revenue in the last few years is having further plans of diversifying into new businesses along with increased global footprint.

The issue is attractive compared to it’s competitors as it is a debt free company and the rating business is expected to grow with more opportunities in offering alongwith the development of corporate bond market. It can be held in the portfolio for long term investment as well.

The financial performance of the companies over the past few years is given below (in Rs millions)

Particulars Mar 2011 Mar 2010 Mar 2009 Mar 2008
Net Sales 1708.69 1379.73 973.88 522.24
Total Income 1766.28 1537.97 1031.53 551.65
PBIDT 1362.20 1257.18 822.13 408.04
PBT 1340.10 1243.15 812.23 402.06
PAT 910.59 870.47 546.75 270.96
Reserves 2929.02 2090.33 1269.90 759.92
Net Worth 3024.20 2185.51 1347.65 837.67
Total Debt 0.00 0.00 0.00 0.00
ROCE 51.45 69.90 73.23 55.20
RONW 34.96 49.27 50.04 37.50
PATM(%) 53.29 63.09 56.14 51.88
CPM(%) 54.59 64.11 57.16 53.03
CEPS 97.99 92.93 71.59 35.62

November 2012

Tara Jewels IPO Analysis

Tara Jewels IPO Analysis, Buy, Subscribe, Indian Jewelry Stocks, Gitanjali Jems, Rajesh Exports, Gold, .

Tara Jewels Limited is coming out with a 100% book building; initial public offering (IPO) of 79,77,778 equity shares of Rs 10 each in a price band Rs 225-230 per equity share. The issue will open on November 21, 2012 and will close on November 23, 2012.

  • Not more than 50% of the issue will be allocated to Qualified Institutional Buyers (QIBs), including 5% to the mutual funds. Further, not less than 15% of the issue will be available for the non-institutional bidders and the remaining 35% for the retail investors.
  • The issue opens for subscription on November 21, 2012 and closes on November 23, 2012.
  • The shares will be listed on BSE as well as NSE.
  • The face value of the share is Rs 10 and is priced 22.50 times of its face value on the lower side and 23.00 times on the higher side.
  • Book running lead managers to the issue are Enam Securities and ICICI Securities.
  • Compliance Officer for the issue is Amol Raje.

Profile of the company

Tara Jewels is an integrated player in the jewellery industry with experience ranging from designing to retailing of jewellery. It is conferred with the status of a Star Trading House by the Ministry of Commerce & Industry, Government of India and have been the highest exporter in gems and jewellery sector for the years 2008-2009 and 2009-2010. The company’s business can be divided into three operations namely, manufacturing, exporting and retailing. Its portfolio of products includes gold, platinum, honeydium, pristinium and silver jewellery with or without studded precious and semi-precious stones. The products have presence across different price points and cater to customers across high-end, mid-market and value market segments.

The company has four manufacturing units, of which one is located in Panyu, China. The other three units are located in Mumbai out of which two units are situated in SEEPZ and one in MIDC. For the two months period ended May 31, 2012, Fiscal 2012, 2011 and 2010 the company has achieved an aggregate production of 554.77 kgs, 10,616.40 kgs, 4,753.25 kgs and 2,562.91 kgs of jewellery, respectively. The manufacturing units are spread over an area of 84,584 square feet employing 35 designers and 955 craftsmen, as on September 30, 2012.

It exports studded jewellery which is manufactured by it and by third party manufacturers. The company exports studded jewellery to jewellery chains including Christ Uhrean and Schmuck and retailers including Walmart. Tara Jewels primarily export to Australia, China, Canada, European Union, South Africa, UAE, UK and USA. In the European Union, the company export to 12 countries including Austria, Germany and Switzerland. The company’s income from export operations has grown at a CAGR of 19.77% from Fiscal 2010 to Fiscal 2012. For the two months period ended May 31, 2012, Fiscal 2012, 2011 and 2010, the income from export operations constitutes 78.82%, 80.90%, 80.99% and 97.59% of the company’s total income, respectively.

IPO Grading

CARE has assigned an ‘IPO Grade 3’, indicating average fundamentals, to the initial public issue of the company.

Proceeds is being used

  • To meet the expenses of establishing retail stores
  • For repayment or prepayment of loans; and
  • For general corporate purposes

Industry Overview

US is the world’s largest market for jewellery followed by China, India and the Middle East and in Europe, the UK and Italy are the largest consumers. (more…)