Month: January 2008

Business of Virgo Engineers Limited

 

 
Virgo Engineers is in the business of manufacturing automated and manual valves. These valves are used in industries such as oil and gas, manufacturing and process industries for the purpose of flow control. The company was founded in 1987 and the promoters have a rich experience in the industry, the combined experience of the two promoters is about 65 years. Virgo engineers has offices in India, USA, Dubai, UK and Malaysia. The manufacturing facilities are in India and Italy.
Virgo Engineers has about 244 customers and as of November 30 2007 were executing 624 orders in all with an order book of Rs.3776.21 million.

 

 
Financials of Virgo Engineers

 

 
The total income has risen from Rs.537.92 million to Rs. Rs.3105.67 million in the last five years but the significant revenue jump has been from fiscal 2006 to 2007 when the income rose from Rs. 1649.31 million to Rs.3105.67 million.
The profit after tax for Virgo Engineers has also risen well in the last five years from Rs.21.21 million in fiscal 2003 to Rs.487.76 million in the last fiscal. This figure however has substantially grown in the last couple of fiscals from Rs.44.26 million in 2005 to Rs.297.19 million in 2006 and to Rs.487.76 million in the past fiscal.
The EPS for the last fiscal was Rs.5.25 and for fiscal 2006 and fiscal 2005 it was Rs.1.90 and Rs.1.56 respectively. 

 

 
Objective of the Issue

 

 
Virgo Engineers is raising money in order to expand its existing manufacturing facility, set up a manufacturing facility in Coimbatore, prepay certain existing debt and for working capital requirements and to invest in its Italian subsidiary.   

 

 
Key Risks

 

 
The key risks that Virgo Engineers face is that there revenues are concentrated among a few customers such that the top customer contributes 9.13% of the revenues and the top ten contribute 29.81% of the revenues in fiscal 2007. This factor coupled with the competitive nature of the business where there are several vendors who supply the same products and the fact that the customers do not have long term contractual obligation pose a risk to the business.

 

 
Conclusion

 

 
While the company has got a good and healthy order book the financials have only started to increase rapidly especially in the last year or so. In such a scenario the IPO would only merit an attention if the P/E multiples are reasonable and not as high as a regular blue chip may demand.

Business of Sejal Architectural Glass Limited

Sejal Architectural Glass is in the business of processing glass with facilities for insulating, toughened, laminated and decorative glasses. The company’s plant is at Dadar and it commenced operations in 2000-01. The company currently processes and markets glass and as a step towards backward integration now plans to set up a manufacturing facility for float glass.

Some of the well known customers of Sejal Architectural Glass are Reliance, L&T and the glass has been used in Bangalore International Airport, Inorbit Mall and Mumbai airport among others. The company also has a trading division which trades in various in house brands as well as other manufacturer products and deals in tiles, sanitary ware, mirrors, glass etc.

The demand drivers for float glass are the real estate sector, malls and shopping complexes, hospitality industry, SEZs and automobile sector. One can see that the company operates in a sector which feeds other growth sectors which are growing right now due to the rising GDP and the fast growing economy. 

Financials of Sejal Architectural Glass

The sales of the company have risen from Rs.1717.07 lakhs in the year 2003 to Rs. 3935.68 lakhs in the year ended 31^st March 2007. The profit after tax for the same period has risen from Rs. 15.07 lakhs to Rs.276.33 lakhs. Growth in both the topline and the bottom line has been steady throughout the last five years.

The EPS for the year 2006-07 was Rs.3.11, Rs.2.88 the year before that and Rs. 3.33 in the year 2004-05.

Objects of the Issue

The IPO of Sejal Architectural Glass looks at raising money for backward integration by way of setting a manufacturing plant for float glass. The installed capacity for this plant would be 200,750 MT and would be set up at Bharuch district in Gujarat.

Conclusion

The company is in an attractive sector with a decent financial record albeit one which is not long. If the issue is priced moderately and the promoters leave something on the table for the investors this could be a good company to look at for the longer term.

Business of Nu Tek India Limited
 

Nu Tek is a telecom infrastructure services provider company which offers infrastructure rollout solutions for both fixed and mobile telecommunications network. Nu Tek offers services to telecom equipment manufacturers, telecom operators as well as third party infrastructure leasing companies. Nu Tek undertakes turnkey projects providing management expertise and installation for telecom sites. Nu Tek has site offices and facilities located in all the major cities and have executed projects in all of the 23 telecom circles. Some of the major clients of Nu Tek are Nokia Siemens Pvt Ltd., Ericsson Ltd., Motorola India Ltd., Tata Teleservices Ltd., Reliance Communications, Bharti Airtel, Idea Cellular, VSNL and Essar Ltd.
 

While the company has an impressing client list it is also dependent on a few customers for most of its revenues, the top customer contributes 57% of its revenues and the top 5 customers contribute 83% of revenues in FY 2007.
 

Financials of Nu Tek India Ltd.
 

The sales for Nu Tek have grown steadily in the past few years. From Rs. 181.03 million in the year ending March 2003, it grew to Rs.638.04 million for the year ending March 2007, it was Rs.485.63 the year before and the Income in the past five years has never shown a decline. The profit after tax has also shown a steady growth in the same period and stood at Rs.134.24 million in the past year.
 

However investors need to bear in mind that the EPS of the company has been far from stable and the EPS in the past three years has been Rs.11.13 for the year ended March 2007, Rs.4.50 for the year ended March 2006 and Rs.363.90 for the year ended March 2005. In this regard while the investor looks at the price band and tries to figure out whether the issue is at a decent P/E multiple or not bear in mind that if you are looking at weighted average figures for past three years then they may not be the best way to judge the right price. The diluted EPS for the period ending September 30 2007 is Rs.5.51.
 

Objects of the Issue
 

The primary goals of the IPO are raising funds for capital expenditure, overseas acquisitions and augmenting long term working capital requirements. The capital expenditure is planned on equipments, vehicles and laptops and is earmarked at a sum of Rs. 235.79 million. While Nu Tek has not reveled their target acquisition company in their prospectus they have earmarked a sum of Rs. 210 million for overseas acquisitions. The chunk of the IPO proceeds at Rs. 440 million has been earmarked for augmenting working capital requirements.   

Business of Jaiprakash Power Ventures
 

Jaiprakash Power is in the business of planning, developing and implementing power projects in India. The company was formed in 1995 and is part of the Jaypee group. Jaiprakash power currently operates the largest hydro electric power plant in the country which is a 400 MW run-of-the-river hydroelectric power plant on the river Alaknanda in Chamoli district of Uttarakhand and was commissioned in 2006 October.
 

 

Apart from this Jaiprakash power is implementing a 1000 MW coal fired power plant in Madhya Pradesh which is expected to become operational in 2012.
 

Financials of Jaiprakash Power Ventures
 

Since there is only one plant that became operational last year there is not a lot of financial history that can be analysed. The revenue figures for the year ending March 2007 were Rs. 2165.91 million and the same for the six months ending 30^th September 2007 were Rs.2427.95 million. The profit after tax for the two corresponding periods were Rs.717.77 million and Rs.1326.80 million respectively. The EPS for the year ending March 31 2007 was Rs.1.51.
 

Objects of the Issue
 

There are three main purposes that for which the funds raised from this proceeding have been earmarked. The first one is to finance the equity component of the upcoming project in Madhya Pradesh which would entail a sum of Rs.15,000 million. Apart from this Jaiprakash associates plans to use the fund proceeds for subscribing to the shares of two companies which will would be involved in executing power projects. The first of them is Jaypee Karcham Hydro Corporation Limited in which Jaiprakash will acquire a 55.36% equity stake and which is engaged in Karcham Wangtoo 1000 MW hydro – electric power project.
The second company is Jaypee Powergrid Limited which will engage in the transmission system of the Karcham Wangtoo project. The stake in this company would be for Rs.690 million for 23%. The project would be commissioned in 2011.
 

Conclusion
 

The company operates in a growth industry and one which has got a special focus from the government in its plans also. The hydro power generation model itself is also insulated from the vagaries of rising raw material costs as the chief raw material is water and most of the company’s projects are in the north eastern region which are blessed with good water flow. The association with Jaypee group is a big plus however the very short history of the company itself is a dampener. If the issue is priced reasonably and P/E multiples reflect that the company is not charging as much as old and established power companies this IPO may well be worth the money for the long term investor. 

Business of Bang Overseas Limited
 

Bang Overseas was incorporated in the year 1992 and is in the business of fashion fabrics and ready to wear requirements in apparel, retail and textile segment. The company has evolved from trading in textiles in its early days and then moving to conceptualizing, designing and outsourcing of fashion fabrics from countries like Turkey, Portugal, Mauritius and other European countries.  Bang Overseas also has a seasonal fabric collection in textiles branded as “Bodywaves” which is marketed through their own distribution and sales channel. The company also launched ready to wear men’s garments under the brand name of “Thomas Scott” in the year 2002 and in the year 2005 started their first apparel manufacturing unit in Bangalore and since then have started a second apparel manufacturing unit as well. The capacity of these units right now is 720,000 and 540,000 units per annum. And the products are sold through company owned retail outlets as well as stores like Shopper’s Stop, Globus and others.  Going forward the strategic focus for Bang Overseas would be expansion of manufacturing facilities with a proposed manufacturing unit in Bangalore with a capacity of 600,000 pieces per month, expanding the retail outlets from 12 to 100 spread across India and expansion of product range by entering into women wear in the casual as well as formal categories. On top of this the company also plans to enter into accessories like sunglasses, belts, time wear, fashion jewellery and fragrances.
 

Financials of Bang Overseas Limited
 

The revenues of Bang Overseas has steadily increased in the past few years and there has been a considerable jump in the last year due to the Bangalore unit becoming active. The total sales for the year ending March 2007 was Rs.966.22 million up from Rs. 446.89 million in the preceding year and for the six months ending Sep 2007 this figure stood at Rs. 650.6 million. The profit after tax corresponding to this was Rs.108.68 million, Rs.21.5 million and Rs.70.38 million respectively.
 

The EPS for 2006-07 was Rs.11.65, 2005-06 was Rs. 2.39 and 2004-05 was Rs. 0.83 on a consolidated basis. If one takes a weighted average with the weight of the latest years being 3,2 and 1 respectively the EPS comes out to be Rs.6.76 and the P/E multiple comes to 30.62 for a price of Rs. 207. The company is proposing a price band of Rs. 200 – 207.
 

The Bang Overseas Limited IPO opens at January 28, 2008 and closes on January 31 2008.
 

IPO Grading Report by CARE for Bang Overseas – 2 out of 5
 

The IPO has been assigned a rating of 2 on a scale of 1 to 5 with 5 being strong fundamentals and 2 being poor fundamentals. The reason attributed by CARE for this low rating are as follows:
 

1.       Small size of operation and order dependant and seasonal business.
2.       Recent compliance of corporate governance practices.
3.       Significant portion of revenues coming from trading division
4.       Present focus only on one segment of Men’s apparel and a fairly new and lesser known brand.
5.       Fragment and highly competitive apparel industry in which the company operates.
 

Some of the positives of the company as indicated by CARE are good track record of the promoters, successful operations of textile business and a growth in revenues as exhibited in the last couple of years. 

Business of PNC Infratech Limited
 

PNC Infratech Limited was incorporated in 1999 and is headquartered in Agra. The company is in the business of engineering and construction and engages in infrastructure projects like highways, bridges, flyovers and airport runways among others.
 

PNC Infratech has execute 14 projects till date, out which 12 have been executed independently and 2 with joint ventures with other companies. Right now PNC Infratech is executing 18 projects out of which 15 are being run independently and 3 with JV Partners. The majority of these are in road construction which is valued at Rs.8,947.9 million spread across 13 projects and the remaining 5 projects relate to runway construction in airports summing up to Rs.996.8 million.
 

The major clients of the company are National Highway Authority of India, Airports Authority of India, Public Works Department, RITES Limited (GOI Enterprise), Military Engineer Services (Ministry of Defence) and Madhya Pradesh Road Development Corporation.
 

Financials of PNC Infratech Limited
 

The company has grown decently in the last five years both in terms of top line and bottom line growth. The revenues have increased from Rs.715.3 million in the year ending March 2003 to Rs.2,564.20 million in March 2007. The profit after tax has also grown from Rs.14.46 million to Rs.132.17 million in the given period. The EPS has grown steadily from Rs. 2.39 in Fiscal 2005, Rs.4.32 in Fiscal 2006 to Rs.6.11 in the last fiscal. For the trailing twelve months the EPS has been valued at Rs.12.23.
 

Objects of the Issue
 

The IPO is being brought out primarily to raise money to invest in capital equipments, prepayment of debt / advances, equity investments in JV / SPVs for BOT projects and funding working capital requirements.

 

Conclusion
 
PNC Infrastructure is in one of the key sectors in the Indian economy where there has been significant growth and is expected to continue in the future as well. The company has done well in the past and that is a good indication of the future. If the issue is not an unreasonable P/E margin for a new issue it should be worth a good bet for the long term investor. 

Business of UTI Asset Management Company
 

UTI Asset Management Company provides asset management services through mutual funds, portfolio management services, and managing venture capital and private equity funds. The total assets under management as on 30^th September were Rs. 495,418 million and is the second largest mutual fund provider in India. The company’s assets under management have been growing at a 28.6% CAGR from Rs. 138,967 million as of Jan 31 2003 to Rs. 450,026 million as of September 30,2007. However in the same time frame the industry as a whole has been growing at a faster pace of 48.9% CAGR.
The EPS of the company has grown from Rs.5.81 in fiscal 2005 to Rs.13.71 in fiscal 2006 and reduced to Rs. 11.51 in fiscal 2007. Since there are no listed AMCs right now there is no comparison available to determine what could be a reasonable P/E ratio for this company.
 

Risks faced by UTI Asset Management Company
 

About 23.3% of the revenues of UTI Asset Management Company last fiscal were derived from SUUTI and in the coming years this is expected to go down in the coming years. The contract itself will expire on January 31 2008, post which it may not be renewed.
UTI Asset Management Company has proposed the termination of its Senior Citizen Unit Plan 1993 which had around 125,000 investors and this step has caused negative publicity and may also lead to legal action which may affect the company adversely. The plan had to be terminated because it became financially unviable.
 

Summary
 

The savings rate in the country has always been as a percentage of GDP and the RBI has estimated this to be 22.1% of GDP between fiscal years 2000 and 2006 however less than half of this finds its way in fiscal assets with the rest going into physical assets like gold and property. While more and more people are expected to join the bandwagon of mutual fund investors this market is poised to grow and companies operating here should also benefit from the steady in flow of money from domestic investors.  The negative brand publicity that UTI has suffered in the past coupled with the lower than industry growth it has shown in the past does however show that within the sector this company may not be the best performer in the years ahead.
 

UTI Asset Management Company has proposed the termination of its Senior Citizen Unit Plan 1993 which had around 125,000 investors and this step has caused negative publicity and may also lead to legal action which may affect the company adversely. The plan had to be terminated because it became financially unviable.