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Financial Weekly

Financial Weekly

15th Aug. 2011 to 21st Aug. 2011

SMART
INVESTMENT

SMART
INVESTMENT

15th Aug. 2011 to 21st Aug. 2011

Investors are disappointed with poor listing of L & T Finance The IPO of Tree house has successfully got through despite very poor response
Bond Issue is the talk of the town in Primary Market, Lots of finance company are eyeing capital market
Mannapuram and Muthoot Finance would join the band wagon of bond issue after SBI, Shriram Transport, L & T Infra, IFCI, IIFL and City Union

Primary Market
Dilip K. Shah

IPO News : (Public Issues)


Sr Company Issue Open Dt. Issue Close Dt. Issue size (Rs. Cr.) Offer price (Rs.) Min. App. Rs. 1,00,00 Limit Rs. 2,00,000 Listing Limit Lead Rating Manager % Remark

1.

New Listing
L & T Finance Holdings
BSE Code : 533519 Offer Price : Rs. 52.00 Listing Date : 12-8-2011 Listing Price : Rs. 51.00 Listing Day High : Rs. 52.50 Listing Day Low : Rs. 49.50 Listing Day Close : Rs. 49.95
sue have become most attractive for investors. It may be recalled that the bond issue of SBI, L & T Infra, IIFL, Shriram City Union got most positive response from investors. Mannapuram Finance :- This Kerala based NBFC is entering in the market on August 18 with its NCD

Brooks Laboratories
(Book Building)

16-8-11 18-8-11 23-8-11 26-8-11

63,00,000 Eq. Shares (Rs. 63 Cr.) 35,000,000 Eq. Shares

90 to 100

60 Shares 960 Shares 1980 Shares BSE (Rs. 6000) (Rs. 96000) (Rs. 198000) -------

D&A Financial Karvy Inv. IDBI Cap. SPA Merch.

35 %

Avoid

NSE BSE NSE

Brook Lab enters in the market this week on August 16 with its IPO having offer price of Rs. 90/100 Market may witness some fancy for the bond issue of Mannapuram Finance entering in the market on August 16 The IPO of SRS Ltd. and the bond issue of Muthoot Finance would tap the market this week
L & T Finance (Code: 533519) :- This IPO, having offer
price of Rs. 52, got listed with BSE on August 12, 2011 at Rs. 51 indicating 1.92 % discount. Post listing the price of this share had little bit inched up to Rs. 52.50, but it could not maintain its momentum and the price tumbled to Rs. 49.50 indicating 5 % discount price and finally it closed at same lower price of Rs. 49.50.

2.

SRS Ltd.
(Book Building)

Next Week

Discovery Price :- The promoters may be compelled to reduce its discovery price from its upper price. Refund : On August 23/24 Allotment :- Investors applied for 1280 shares worth Rs. 2 lakh could be allotted 470/490 shares and investors applied for 640 shares worth Rs. 1 lakh could be allotted 235/250 shares. Listing : This IPO may get listed on August 25/26 Brook Laboratories :- This Gujarat based pharmaceutical companies is planning to tap the capital market with its IPO of 63 lakh shares worth Rs. 63 crore as it intends to undertake expansion plan for its Gujarat based plant. The offer price for this IPO is Rs. 90/100. Considering its pre IPO approach it seems that promoters and merchant

bankers must have managed this IPO before it tap the market as it has not arranged any press meet or has not taken any aggressive marketing strategy. How much it would be oversubscribe:- The promoters and merchant bankers may get highest application

from retail and HNI segment since it is already managed but it may not get enough response from QIB segment. Overall it may oversubscribe 1.5 to 2 times more than its size. Refund : On August 29/30 Allotment :- Most of the retail category may get firm and full allot-

ment.

Listing :- This IPO may get listed


on September 2, 2011. Investors must not forget that the listing of this IPO may turn most sensational since it is already managed, but they must also remember that finally it would close in discount price. Bandwagon of Bond Issue :The condition of primary market also gets deteriorating along with secondary market but most of the bond is-

Manappuram Finance Ltd. NCD


Particulars Interest Rate (PA) Tenure 400 Days 2 Yr. Individual/HUF upto Rs. 5 Lakh -- 12.20 Individual/HUF above Rs. 5 Lakh -- 12.20 Others (QIBs, Corporate) -- 12.00 Individual/HUF upto Rs. 5 Lakh 12.00 12.56 Individual/HUF above Rs. 5 Lakh 12.00 12.34 Others (QIBs, Corporate) 12.00 12.34 -At Semi Redemption Annual Type of Investor

The IPO of this week Tree House :- This IPO, having


offer price of Rs. 135/153 was opened on August 10 and was closed on August 12.

bond Issue worth Rs. 750 crore. This company offers 12.20 % interest rate for short term and 12.36 % interest for term ranging from 400 days to two years. Considering its high interest rate this issue may get overwhelming re-

Bond News
Sr Company Issue Open Dt. Issue Close Dt. Issue size (Rs. Cr.) Offer price (Rs.) Min. App. Effective Yield (P.A.) Rating 24 Months 36 Month 60 Month % Remark

Shriram City Finance 2. Manappuram Finance


1.

11-8-11 27-8-11 18-8-11 5-9-11

Rs. 750 Cr. Rs. 1000 Rs. 750 Cr. Rs. 1000

10 NCDs (Rs. 10000) 5 NCDs (12.20 % (Rs. 5000) Ind.& HUF)P.A. (12 % QIB/ Corporate)P.A.

11.85 % (P.A.) --

12.10 % 40 % (P.A.) --

Risky

44 % Attractive

Grey Market IPO Premium


Co. Name Vaswani Ind. Tree House Brooks Lab. Offer Price (Rs.) 49 135 to 153 90 to 100 Premium Kostak (Rs.) (Rs. 1 Lac.) Discount --1/1.5 -Discount ---

How much it was oversubscribed ? ;- This IPO was oversubscribed 1.85 times more despite there was no any sort of fancy. It got 1.02 time more oversubscription from QIB segment, 1.68 times more from HNI Segment and 2.76 times more from retail segment making average oversubscription 1.85 times more than its size.

Yield to Maturity (Pa)

Interest Payment

Manappuram Fin. NCDs Issue open on Aug. 18, 2011

Tree House Education IPO Subscribed


10-8 QIB 0.50 HNI 0.06 Retail 0.54 Average 0.44 11-8 0.50 0.09 1.12 0.68 12-8 1.02 1.68 2.76 1.85

The face value of bond is Rs.1000/- & Minimum application could be for Rs.5000/Manappuram Finance Limited one of the leading listed NBFCs lending money against the pledge of household, used, gold jewellery (Gold Loans) in India, in terms of gold loan portfolio as of March 31, 2011, 2010 and 2009. will open on August 18, 2011, its maiden public issue of bonds in the nature of secured, redeemable, non-convertible debentures (Bonds) of face value of Rs. 1,000 each aggregating to Rs. 400 crore with an option to retain over subscription up to Rs. 350 crore, aggregating to Rs. 750 crore (the Issue). The NCD Issue with two investment options and yield to maturity of up to 12.56% (per annum) closes on September 5, 2011, with an option of early closure as may be decided by the board of directors of the Company subject to necessary approvals. The face value of each Bond is Rs. 1,000 and the minimum application can be for five Bonds (Rs. 5,000) and in multiples of one Bond thereafter. The Bonds will be listed on Bombay Stock Exchange (BSE) and will have a tradable lot size of 1 Bond. The Bonds proposed to be issued by the Company have been rated CARE AA- by Research Limited CARE and BWR AA- by Brickwork Ratings India Pvt. Ltd. (Brickwork). There are two investment options: Option I: The maturity date is 400 days from the deemed date of allotment and the maturity amount per Bond is Rs. 1,132.25 for Bondholders in all categories (Face Value of the Bonds plus redemption premium). The yield to maturity for bondholders in all categories is 12% p.a. Option II (Semi-Annual interest payment): The maturity date is 24 months from the deemed date of allotment. The interest rate is 12% p.a. for Bondholders in Categories I and II and 12.2% p.a. for Bondholders in Category III. The yield to maturity is 12.34% p.a. for Bondholders in Categories I and II and 12.56% for Bondholders in Category III. The interest payment is semi-annual and the face value plus any interest that may have accrued is payable on redemption. The funds raised through this Issue will be utilized for various financing activities including lending and investments and towards business operations including for capital expenditure and working capital requirements, after meeting the expenditures of, and related to, the Issue. The Lead Managers to the Issue are Morgan Stanley India Company Private Limited, A. K. Capital Services Limited, Axis Bank Limited and ICICI Securities Limited. The Co-Lead Managers to the Issue are RR Investors Capital Services (P) Limited, Karvy Investor Services Limited and SMC Capitals Limited.

Bond Issue
Bonds Name
IIFL Bond Shriram City Union Manappuram Fin.

Offer Price (Rs.)


1000 1000 1000

Premium (Rs.)
3 to 4 14 to 15 18 to 20

Kostak (Rs. 5 Lac.)


-6500/6700 7200/7500

sponse from retail and HNI segment. Muthoot Finance :- This company, entered in the capital market during last April with its mega IPO worth Rs. 900 crore, is entering in the market next week with its maiden NCD bond issue worth Rs. 1000 crore which is going to be listed with BSE. The IPO of next week :- Delhi based SRS Ltd is planning to tap the market next week with its proposed IPO. SRS Ltd. :- This company is engaged with cinema, food & beverages, cash & carry and jewellery business and is planning to enter in the capital market on August 23 with its IPO of 3.5 crore shares worth Rs. 220 crore. This IPO would close on August 26 and the offer price may be worked out at Rs. 60/70. Post IPO the equity of the promoters would reduce to 74.04 % from current 98.89 %. The company has posted the net profit of

Rs. 37.53 crore on turnover worth Rs. 2040 crore for the FY 2010-11. This IPO is going to be listed with both BSE and NSE. Reid & Taylor :- This company, promoted by S. Kumar Nationwide, is planning to enter in the capital market during next September-October with

its IPO worth Rs. 1000 crore. VKS Projects :- It is a EPS contractor company that is planning to tap the market with its IPO of Rs. 55 crore for which it has already filed its DRHP with SEBI beside the company intends to raise Rs. 120 crore via preIPO private placement.

Duplex Industries :- This company is engaged with copper wire production and is planning to enter in the market with its IPO worth Rs. 125 crore for which it has already filled its DRHP with SEBI. The company has achieved 111 % and 201 % growth for its sales and net profit respectively.

Larsen & Toubro (Code : 500510) :- posted a 12 per cent rise


in net profit for the quarter ended June 30 on the back of better execution of projects.Order inflow for the quarter was four per cent higher at Rs 16,190 crore. The total order book was up 26 per cent at Rs 136,172 crore (Rs 107,816 crore). The major orders during the quarter came from buildings and factories, infrastructure, power generation, transmission and distribution, minerals and metals and hydrocarbon sectors. Last week, Abu Dhabi Gas Industries (GASCO) has awarded a lumpsum turnkey contract worth an estimated 18.5 crore dollars on a new gas pipeline to L&T. The company eyes more orders overseas. Particularly in west asia and east asia, where it has already presence. Around 20 per cent of orders that the company had bagged in the June quarter, were from international destinations. Its subsidiary L&T Finance & Holdings has listed last week below offer price due to overall negative sentiment. It will get momentum whenever the market rises. So, the value-unlock process for the shareholders of L&T has started. Still lot more to be listed. The stock has become more attractive after correction. Accumulate L&T.

Accumulate Bosch India on strong fundamental and huge cash Strong prospects in agriculture sector makes M&M a safe bet Engineers India Ltd a value buy in this time of uncertaity L&T becomes more attractive, Accumulate GSFC will get momentum with good monsoon
This also makes the company a potential delisting candidate sometime in the times to come.Bosch Indias equity is just Rs. 31.40 crore (FV Rs. 10 each), of which 71.18% was held by the foreign parent while 18.95% was held by foreign and Indian institutional investors. Balance 9.87% is held by Indian public. Accumulate. GSFC (Code : 500690) : Gujarat State Fertilizers & Chemicals (GSFC) has posted a net profit of Rs 142 crore for the quarter ended June Indias largest sports utility vehicle and tractor maker, reported a 7.6% increase in first quarter net profit on increased sales.Profit, excluding that of subsidiaries, rose to Rs.604 crore in the June quarter from Rs.562 crore in the year-ago period.Sales increased 30% to Rs.6,673 crore in the quarter. M&Ms utility vehicle sales expanded 15% to 44,407 units in the June quarter, while sales of goods carrier, which include pick-up trucks Maxximo and Gio, jumped 53% to 12,154 units. Tractor sales rose 20% to 57,500 units from a year ago. Mahindra gained an additional 3% share in the tractor market to reach 43% in the quarter. There might be slow down in SUVs demand, but prospects for agricultural and services sector growth remain reasonably robust. It makes M&M stock a safe bet at this time. Accumulate in small phase.

Brooks Laboratories
How to apply for retailers ?
Shares 60 120 180 240 300 360 420 480 540 600 660 720 780 840 900 960 Rupees 6000/12000/18000/24000/30000/36000/42000/48000/54000/60000/66000/72000/78000/84000/90000/96000/Shares 1020 1080 1140 1200 1260 1320 1380 1440 1500 1560 1620 1680 1740 1800 1860 1920 1980 Rupees 102000/108000/114000/120000/126000/132000/138000/144000/150000/156000/162000/168000/174000/180000/186000/192000/198000/-

Brooks Lab. IPO Opens on 16th Aug & Closes on 18th Aug. 2011 Price Band fixed at Rs. 90 to 100 Per Share
Brooks Laboratories, a pharmaceutical company has come out with an IPO of Rs 63 crore. The company is a pharmaceutical contract research and manufacturing (CMO) services company. It has a wide range of products catering to the critical care segment in parental sections like Beta Lactam, Cephalosporin & general dry powder injectables, Ampoules and liquid vials, dry syrups and tablets etc. Its product portfolio comprises of 28 injectables, 19 tablets and 2 dry syrups which are marketed domestically. Brooks Labs IPO shall open on 16th August and shall close on 18th August, 2011. The company has fixed the price band at Rs 90-100 a share. Brooks Labs plans to utilize the proceeds of the issue to set up a new manufacturing unit at JB SEZ Pvt Ltd, Panoli, Gujarat for manufacturing various pharmaceuticals formulations to the tune of Rs 51.8 crore. It also needs Rs 5 crore for long-term working capital. In the year ended March 2011, Brooks reported a 17% growth in revenues to Rs 53.20 crore over the previous year. The net profit for the same period went up 32.6% to Rs 6.9 crore and secured loans declined 26.5% in FY11 to Rs 8.7 crore. D & A Financial Services Pvt Ltd is the book running lead manager to the issue. Link Intime India Pvt Ltd is the registrar.

Smart Best Buy


S. N. Zaveri
30, 2011 as compared to Rs 109 crore for the quarter ended June 30, 2010 representing rise of 30.28%.Net sales has increased from Rs 1067 crore for the quarter ended June 30, 2010 to Rs 1208 crore for the quarter ended June 30, 2011, representing increase of 13.21%. Apart from di-

The other side of NCD Issue of Mannapuram Finance

Engineers India (Code : 532178) : Engineers India (EIL) registered 29% growth in its bottomline to Rs. 148.07 crore for the quarter ended June 2011, riding on the strong 41% growth in revenue to Rs. 853.60 crore and higher other income, which was up 44% to Rs. 41.77 crore. Upside in revenue is led largely by Lumpsum Turnkey Projects (LTP) whose segment revenue was higher by 70% to Rs. 575.65 crore. Engineers India is a play on the technology and engineering segments in the oil and gas and other infrastructure industries. The company's presence in the lucrative hydrocarbon industry spanning commissioning of refinery and petrochemical units, consultancy services for offshore and onshore oil and gas and laying of pipelines have provided it a market leadership in the local arena. The companys revenue has grown at a compounded annual rate of 55 per cent to Rs 2823 crore in FY-11, since EPC contracts saw a gradual increase in sales contribution over the last four years. Its order flows jumped by 166 per cent in FY-11, taking the order book to Rs 7,500 crore or 2.6 times sales in the latest ended fiscal. The stock is a value buy in this time of uncertainty. Buy.

How IPOs undertaken by Deutsche & DSP Merill Lynch ?

DSP Merrill Lynch


Company Cairn India IDEA Cellular IL&FS Engg. Kolte Patil Omaxe Purvankara Offer Price 160 278 75 370 145 400 93 94 39 63 CMP Annualized Ch.% 12.84 5.58 -30.33 -30.13 -20.11 -37.30

Market will be lacking liquidity of this bond since it is going to be listed with BSE only The other side of Brook Labs Rating agency CARE and BRIKS have together awarded AA rating to this bond The price of promoters each share is Rs. 0.71, book value is Rs. 19 and the offer price is Rs. 90/100 which indicates safe investment but it can downgrade anytime The company has allotted 91 lakh share to its promoters within short period of two years There is no any provision for put option in this bond, Financial performance for FY 2011 is excellent The company has allotted 83000 shares to its promoters during Oct-Nov, 2010 on preferential basis Gross NPA is merely 0.40 % and CAR is 29.13 % which is better for NBFC Rating agency ICRA has awarded 2/5 rating to this IPO that indicates poorer than average fundamentals Investment is limited up to 400 days to 2 years reducing most of the risk The company has achieved 22 % and 60 % CAGR growth for its sales and net profit respectively It may be attractive issue for retail investors since it offers high rate of interest Co. could maintain its RONW but investors must refrain from this IPO considering its inflatory P/BV ratio Rating agency CARE and BRIKS have together awarded AA rating to this bond which indicates safe investment
but it can downgrade anytime if companys performance decline which may prove risky for investors. Market will be lacking liquidity of this bond since it is going to be listed with BSE only. Generally the volume liquidity at NSE is more than BSE The trading of most of the bonds are negligible at Indian bourses beside some bond are not enough lucky to get single trade for last many months. Barring bond of SBI, Shriram and L & T Infra most of the bond, entered in the capital market during near past, are currently traded in discount. The company has not made any provision for put option in this issue Remark :- The Mannapuram Finance has very healthy and robust gold loan portfolio worth Rs. 6371 crore as on March 31, 2011. This portfolio includes 20 lakh gold accounts and 12 lakh customers. The company has very vast network of 2064 branches scattered across the country. Mannapuram Finance, having paid up equity worth Rs. 83 crore and net worth of Rs. 1924 crore, has posted net profit worth Rs. 283 crore on turnover of Rs. 1182 crore for the FY 2011. Seeing its financial front it seems more robust as it has gross NPA of merely Rs. 25 crore i.e. 0.40 % whereas its CAR is 29.13 % Recommendation :- Some of the provisions made in this issue are little bit more attractive compared to provisions of other bond issue as it has investment scheme up to 400 days to 2 years that directly reduce the risk factor of the issue. Beside it may draw attention from most of the retail investors since it offers more than 12 % interest per annum which is more than fixed deposit rate offered by most of banks. Considering its very strong fundamentals the issue seems safer for investors. The average price of promoters each share is Rs. 0.71, book value is Rs. 19(as on March 31, 2010) and the offer price is Rs. 90/100 The company has issued bonus shares for three time to its promoters within short period of two years ranging from August 7, 2008 to November 1, 2010. On August 7, 2008 it has issued 19 lakh shares in ratio of 3:1, On March 5, 2010 it has allotted 21 lakh bonus share in ratio of 5:4 and on November 1, 2010 it has issued 51.5 lakh bonus share in ratio of 10:11 making total 91,20,112 shares. Rating agency ICRA has awarded 2/5 rating to this IPO that indicates poorer than average fundamentals The company during October 6, 2010 to November 1, 2010 has allotted 82810 shares at Rs. 10 on preferential basis. The 71 % of its total income is incurred from 10 clients only which is a risk factor for the company. Remark:- Barring FY 2009 the company, during FY 2007 to FY 2010, had achieved 22 % and 60 % CAGR growth for its sales and net profit respectively beside it has achieved the same figure during FY 2011 as its sales is up 17 % to Rs. 53.27 crore and net profit is up 32.5 % to Rs. 6.89 crore. Recommendation:- Considering its cap price of Rs. 100 and annual EPS of Rs. 7 for the FY 2011 the preIPO PE ratio is worked out at 14.39 but considering its post IPO diluted equity worth Rs. 16.20 crore and estimated annual EPS of Rs. 4.25 the PE ratio could be worked out at 23.49x which is very higher compared to its peer companies. The company could maintain its RONW at 36 % and P/BV ratio is worked out at 5.22 from its high price band which is higher hence investors must refrain from this IPO.

Bosch India (Code : 500530)


: Auto component maker Bosch has reported better Q1 numbers. Its net profit rose by 32.99% to Rs 278.93 crore for the second quarter ended June 30.The company had a net profit of Rs 209.73 crore in the same period previous financial year. The company's net sales rose to Rs 2,024.08 crore for the second quarter ended June 30, 2011, compared to Rs 1,656.08 crore in the same period previous fiscal. To commemorate 60 years of the company and in celebration of 125th anniversary of Bosch, the company, following calendar year cycle for financial reporting, declared a special dividend of Rs. 85 per share recently, in addition to the Rs. 40 dividend for CY10.Bosch also enjoys debt-free status, with surplus cash of about Rs. 2,500 crore or Rs. 780 per share, as of 30th June 2011.

Co. Name L&T BOSCH GSFC M&M Engg. India

CMP (`) `) 1643.00 7348.00 385.00 740.00 268.00

310 126

Deutsche Equities & DSP Merrill Lynch


Company First Source DLF Company IRB Infra Offer CMP Annualized Price Ch.% 64 14 -28365 525 195 -21.45 Offer CMP Price 185 164 Annualized Ch.% -3.43

Deutsche Equities

ammonium phosphate (DAP), GSFC produces caprolactam, a key input into synthetic textiles and urea, and complex fertilisers. A landmark policy shift to a nutrient based system for determining subsidy has helped producers contract inputs and fix realisations at the beginning of the year. This system also allows producers to receive subsidies for nutrients hitherto not covered and reduces uncertainty about cash flows. The stock is in the range of Rs.350 to Rs. 410 since last one month. It will consolidate for some more time and then rally with the market. The stock will get momentum with good monsoon. Buy. M & M (Code : 500520) : Mahindra and Mahindra Ltd (M&M),

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