Binani Cements
Name of the Company: Binani Cements Limited
Sector/Industry: Cement
Issue Size: 2, 05, 00,000. The offer constitutes 10.09% of post offer paid up capital of the company.
Issue Price: Rs 75 - 85
Issue Opens: Monday, May 07, 2007
Issue Closes: Thursday, May 10, 2007
Promoter(s): Binani Industries.
Company Website: http://binaniindustries.com/bil%20subsidiaries/bincement.html
Book Running Lead Manager: ICICI Securities.
Registrar: MCS Limited
IPO Rating: The Company is not proposing for IPO Rating.
Draft Red Herring Prospectus: www.sebi.gov.in/dp/binanidraft.pdf
About the Company: Binani Cements is the flagship company of the Binani Group and has facilities for the manufacture of 2.25 MTPA (million tones per annum) of cement along with 25 MW (Mega Watt) of coal/lignite based captive power plant at Sirohi, Rajasthan. (I have been to Sirohi and it is very close to my ancestor’s village)
The Sirohi facility was set up with the support of Denmark based F.L. Smidth and Larsen & Toubro Ltd., and was completed in 19 months. The Company has two limestone (important raw material for manufacturing cement) mines, namely Amli and Thandiberi, operated on long term lease bases which are at a distance of 2 and 7 Km from the plant respectively. These mines have proven reserves of 195 MnT (million tones) as on April, 2005.
The company’s primary markets are northern states of Rajasthan, Delhi, Harayana, Punjab and Gujarat.
Overview of the Industry in which Binani Cement operates:
India is the second largest cement producer in the world. Healthy CAGR (compounded annual growth rate) of over 8%.
Amongst the lowest per capita consumption in the world at 110 kg. So lot of scope for growth.
Future Demand Drivers
Expected GDP Growth level of > 7% (conservative guidance)
Initiatives for growth of Housing
Development of Roads/Other Infrastructure
Indian Cement Industry has a production capacity of 170 MTPA and running at almost 100% capacity utilization. Right now the situation is in favour of producers since demand is more than supply and till few months back cement producers used this situation to their benefit and had complete control over prices. But now cement industry is on PC’s (P.Chidambaram) inflation control radar and in my opinion cement industry would slowly lose its pricing power. Any opposition by cement players will be dealt with hawkish measures since election season will be beginning soon.
Always experts feel that, the recent capacity additions would be on block by next year and this might create supply glut.
I feel this industry excessively relies on government policies like infrastructure spending, interest rates and tax structure.
Objectives of the Issue:
The issue’s primary objective is to list company shares on the stock exchanges and provide JP Morgan an opportunity to unlock the value of its investment.
It is very clear that the money raised would not go to the company but will be going to JP Morgan who is selling a part of its 25% stake in Binani Cements. Hence for Binani cements this issue does not add much value.
Strengths:
Captive power plants – It has a power plant of 25 MW and another power plant of 40 MW is under construction. This power should be sufficient for the company to be self reliant in terms of
power requirements.
Lime stone reserves – It has limestone reserves of 195 MTPA and it is sufficient for 30 years of cement production at the rate of 5.25 MTPA.
The markets in which the company operates are likely to get an exclusive freight based railway corridor.
Weakness:
High debt to equity ratio of 2.2 and this is three times more than the industry standard. The company would be paying substantial part of profit as interests and most of the loans taken my company are long term.
Small Player – Even after all its planned capacity addition, Binani would have 2.5 – 3% share in the Indian Cement market. I think in commodity business the big you are the better it is. The size brings in lot of economies of scale.
All eggs in the same basket – The Company’s complete production facility is a single location. I think it is a substantial risk considering the fact that Rajasthan is particularly vulnerable to Indo-Pak conflict.
Valuation:
In FY 2007, the company achieved revenues of Rs 680 crores and net profit was 96 crores. This translates into an EPS of Rs 4.7 and the PE ratio for the band of Rs 75 -85 turns out to be 16 – 18.
Price comparison with peers:
Companies of almost the same size of Binani are currently trading at much lower valuation. You can get JK Cement at PE of 8, Madras Cement at PE of 12.9 and Shree Cement at PE of 11. Hence definitely over priced compared to its peers.
Final Verdict:
It is very simple .. DON’T APPLY to this issue. J P Morgan (the seller of these shares) is asking for too much. In Sep 2005, J P Morgan had picked up 25 % of Binani Cements paying 120 crores. With 18 months, it is expecting its 25 % stake to have a valuation in the range of 375 – 425 crores. I agree that in this span of time the fortunes of cement industry has improved but still this kind of ultra high valuations are unjustified. It is a clear case of exploitation of the current bull run.
Don’t apply for this issue and hope J P learns a lesson or two about India’s prudent retail investors.
Sources:
www.sebi.gov.in/dp/binanidraft.pdf
Financial figures copied from ET Investors Guide, May 8, 2007
Tuesday, May 8, 2007
Tuesday, May 1, 2007
MIC Electronics IPO Review
Name of the Company: MIC Electronics Limited
Sector/Industry: LED Display System, Software and Telecom
Issue Size: 51, 00,000. The issue would constitute 25.34% of the fully diluted post issue paid up equity capital
Issue Price: Rs 129 - 150
Issue Opens: Monday, April 30, 2007
Issue Closes: Tuesday, May 08, 2007
Promoter(s): Dr M.V. Ramana Rao
Company Website: http://www.micelectronics.com/
Book Running Lead Manager: Edelweiss Capital Limited.
Registrar: Intime Spectrum Registry Limited
IPO Rating: The Company is not proposing for IPO Rating.
Draft Red Herring Prospectus: www.sebi.gov.in/dp/micdraft.pdf
About the Company: The Company began its operations in the year 1988, in Andhra Pradesh India. The business is broadly divided into three parts:
Media: LED Video Display, LED Products & Services.
InfoTech: Embedded/ Telecom Software, Business Intelligence, Corporate Governance and IT services.
Communications & Electronics: Digital Loop Carriers, HandHeld Devices, CDM/GSM Products.
Overview of the Industry in which MIC Operates:
Media: The Indian advertising spends, as a percentage of GDP is 0.34% as against the world average of 0.98%. The Indian Industry will catch up this figure over a period of time and the huge gap will be bridged. Hence Media industry is poised for huge growth via increased ad spends as well as 9 - 10% GDP growth.
MIC mainly operates in Out-of-Home (OOH) Media Industry. OOH Media broadly describes a variety of advertising vehicles, which reach consumers where they shop and travel. These include:
Billboards / Hoardings
Street Furniture, Bus queue shelters, phone kiosks and newsstands; and
Transit/Airport/Malls, Buses (sides and fully-wrapped), trains, station platforms, commuter rail cards, airports, malls, trucks, taxi tops.
With CommonWealth games in Delhi, modernization of airports in Delhi and Mumbai, greenfield airports in Bangalore and Hyderabad and large no of integrated townships and multiplexes coming up, it is not difficult to visualize the growth prospects of this sector. Another big trigger for OOH industry could be modernization of Indian railway stations under PPP (Public Private Partnership) model.
InfoTech and Communications: Do I need to mention about the growth prospects of this industry? Everyone knows about it.
Objectives of the Issue:
Setting up additional facility for manufacture of LED Video Modules at Cherlapally, Hyderabad and Roorkee.
Investment in LED video display systems to be used for rental/leasing business.
Investment on Design & Development of 3D Stereoscopic Displays.
Investment on Market Development – Domestic & Overseas.
For acquisition of InfoSTEP Inc, USA.
Augment working capital requirements.
Meet the expenses of the issue.
Achieve benefits of listing.
The objectives of the issue looks healthy because most of the money raised would be spent in capacity expansion as well as geographical spread and this will positively impact the topline as well as bottomline.
Strengths:
As on October 2006, the order book for three divisions stood at Rs 47 crores and 85% of it belongs to LED business.
MIC is operating in a niche segment and enjoys monopoly in its LED division. Most of the money raised through this issue would be invested in LED business which in turn would increase their profit margins since LED business has higher profit margins compared to InfoTech and Communications.
It has few marquee clients like Reliance, BSNL and MTNL.
Weakness:
There are significant concerns regarding the way in which the promoters have acquired shares in the company. On June 15, 2006, 99035 shares were allotted to Mr M.V.Ramana Rao at the price of Rs 10.81 and again on July 18, 2006, 2725 were allotted to him at the price of Rs 10. On top of this, on September 28, 2006 bonus was declared in the ratio of 2:1. Thus the effective cost of acquisition per share for the promoter is Rs 6.66 and all this happened just one year back. I find this completely outrageous because there were earlier precedents when huge quantities of shares were allotted to other shareholder at a premium of Rs 205. This clearly shows that the promoters have put their individual interest ahead of company’s interest.
MIC is significantly dependent on Nichia Corporation for LEDs which is primary raw material for outdoor LED display systems. Over dependence on a single vendor might land MIC in trouble.
MIC is too small to be involved in three high profile sectors and it gives an impression that the management is trying to do too many things at a time rather than concentrating on core competency.
It has not been exposed to any significant competition and so entry of any sound domestic or international player might give MIC tough time.
Financial Summary:
For FY 2006 ending in June MIC achieved revenues of 101.39 crores and PAT of 15.59 crores.
Valuation:
Since we don’t have PAT figures for the whole year we need to do certain extrapolation with the numbers we have. The EPS for FY 2006, ending in June is 7.74. Assuming a growth of 30% we can assume that the EPS for FY 2007, ending in June would be 10. Hence the valuation turns out to be in the band of 12.9 to 15 which according to me is reasonably priced but we also need to look at inconsistent track record as well as the weaknesses mentioned.
Currently equity markets are going through uncertain times. There is no conviction in the market. As far as Indian markets are concerned people have already started discussion about ‘May mayhem’ syndrome. Market crash is on the cards but no one knows the time. Investors comfortable with risk can look forward towards investing in this issue for listing gains if the sentiments are good on the listing date. Risk averse investors can ignore this issue and wait for better opportunities.
Keep visiting this blog for the follow up action as well as details about upcoming issues.
Happy Investing……………
Sector/Industry: LED Display System, Software and Telecom
Issue Size: 51, 00,000. The issue would constitute 25.34% of the fully diluted post issue paid up equity capital
Issue Price: Rs 129 - 150
Issue Opens: Monday, April 30, 2007
Issue Closes: Tuesday, May 08, 2007
Promoter(s): Dr M.V. Ramana Rao
Company Website: http://www.micelectronics.com/
Book Running Lead Manager: Edelweiss Capital Limited.
Registrar: Intime Spectrum Registry Limited
IPO Rating: The Company is not proposing for IPO Rating.
Draft Red Herring Prospectus: www.sebi.gov.in/dp/micdraft.pdf
About the Company: The Company began its operations in the year 1988, in Andhra Pradesh India. The business is broadly divided into three parts:
Media: LED Video Display, LED Products & Services.
InfoTech: Embedded/ Telecom Software, Business Intelligence, Corporate Governance and IT services.
Communications & Electronics: Digital Loop Carriers, HandHeld Devices, CDM/GSM Products.
Overview of the Industry in which MIC Operates:
Media: The Indian advertising spends, as a percentage of GDP is 0.34% as against the world average of 0.98%. The Indian Industry will catch up this figure over a period of time and the huge gap will be bridged. Hence Media industry is poised for huge growth via increased ad spends as well as 9 - 10% GDP growth.
MIC mainly operates in Out-of-Home (OOH) Media Industry. OOH Media broadly describes a variety of advertising vehicles, which reach consumers where they shop and travel. These include:
Billboards / Hoardings
Street Furniture, Bus queue shelters, phone kiosks and newsstands; and
Transit/Airport/Malls, Buses (sides and fully-wrapped), trains, station platforms, commuter rail cards, airports, malls, trucks, taxi tops.
With CommonWealth games in Delhi, modernization of airports in Delhi and Mumbai, greenfield airports in Bangalore and Hyderabad and large no of integrated townships and multiplexes coming up, it is not difficult to visualize the growth prospects of this sector. Another big trigger for OOH industry could be modernization of Indian railway stations under PPP (Public Private Partnership) model.
InfoTech and Communications: Do I need to mention about the growth prospects of this industry? Everyone knows about it.
Objectives of the Issue:
Setting up additional facility for manufacture of LED Video Modules at Cherlapally, Hyderabad and Roorkee.
Investment in LED video display systems to be used for rental/leasing business.
Investment on Design & Development of 3D Stereoscopic Displays.
Investment on Market Development – Domestic & Overseas.
For acquisition of InfoSTEP Inc, USA.
Augment working capital requirements.
Meet the expenses of the issue.
Achieve benefits of listing.
The objectives of the issue looks healthy because most of the money raised would be spent in capacity expansion as well as geographical spread and this will positively impact the topline as well as bottomline.
Strengths:
As on October 2006, the order book for three divisions stood at Rs 47 crores and 85% of it belongs to LED business.
MIC is operating in a niche segment and enjoys monopoly in its LED division. Most of the money raised through this issue would be invested in LED business which in turn would increase their profit margins since LED business has higher profit margins compared to InfoTech and Communications.
It has few marquee clients like Reliance, BSNL and MTNL.
Weakness:
There are significant concerns regarding the way in which the promoters have acquired shares in the company. On June 15, 2006, 99035 shares were allotted to Mr M.V.Ramana Rao at the price of Rs 10.81 and again on July 18, 2006, 2725 were allotted to him at the price of Rs 10. On top of this, on September 28, 2006 bonus was declared in the ratio of 2:1. Thus the effective cost of acquisition per share for the promoter is Rs 6.66 and all this happened just one year back. I find this completely outrageous because there were earlier precedents when huge quantities of shares were allotted to other shareholder at a premium of Rs 205. This clearly shows that the promoters have put their individual interest ahead of company’s interest.
MIC is significantly dependent on Nichia Corporation for LEDs which is primary raw material for outdoor LED display systems. Over dependence on a single vendor might land MIC in trouble.
MIC is too small to be involved in three high profile sectors and it gives an impression that the management is trying to do too many things at a time rather than concentrating on core competency.
It has not been exposed to any significant competition and so entry of any sound domestic or international player might give MIC tough time.
Financial Summary:
For FY 2006 ending in June MIC achieved revenues of 101.39 crores and PAT of 15.59 crores.
Valuation:
Since we don’t have PAT figures for the whole year we need to do certain extrapolation with the numbers we have. The EPS for FY 2006, ending in June is 7.74. Assuming a growth of 30% we can assume that the EPS for FY 2007, ending in June would be 10. Hence the valuation turns out to be in the band of 12.9 to 15 which according to me is reasonably priced but we also need to look at inconsistent track record as well as the weaknesses mentioned.
Currently equity markets are going through uncertain times. There is no conviction in the market. As far as Indian markets are concerned people have already started discussion about ‘May mayhem’ syndrome. Market crash is on the cards but no one knows the time. Investors comfortable with risk can look forward towards investing in this issue for listing gains if the sentiments are good on the listing date. Risk averse investors can ignore this issue and wait for better opportunities.
Keep visiting this blog for the follow up action as well as details about upcoming issues.
Happy Investing……………
Fortis Healtcare Application Status
Check Fortis Healtcare allotment status at http://www.intimespectrum.com/site/ipo.asp. Click on 'Check Application Status' and then select 'Fortis Healthcare'.
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