IPO/NFO – Page 14

Sai Silks IPO

Business of the Company

Sai Silks is in the business of retailing garments, ladies wear and other textile products. Sai Silks focuses on sarees in the mid and upper range and is present in Southern India.

It has 9 retail stores in all, out of which 5 are in Bangalore, 3 in Hyderabad and 1 in Guntur. Sai Silks started out in 2005 as a saree retailer and until recently maintained its focus on sarees. Now, it has diversified into women dress material, kids wear and menâ€™s wear. The 9 stores are spread out over 75,000 square feet and two states.

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Use Google Alerts to track your IPOs

My posts on IPOs usually bring a few questions about when the company will be listed on the stock exchange and start trading.

In the case of mutual fund NFOs, you can take a look at what the reopen date will be, and normally this is the date that you can expect the mutual fund to start trading.

However, in the case of IPOs, the trading date is not always decided before hand, and investors need to keep an eye out for the trading dates.

Continue reading “Use Google Alerts to track your IPOs”

NHPC IPO

NHPC IPO: Price Band, Grade and Date

The price band of NHPC IPO is between Rs. 30 and Rs. 36.

ICRA has rated the NHPC IPO 3 out 5.

NHPC IPO opens at August 7^th 2009 and will close on August 12^th 2009.

NHPC: Business Overview

NHPC is a hydroelectric power company which has got 13 power stations, and an installed capacity of 5,175 MW. NHPC is predominantly present in the North and North Eastern part of India, and has power stations in the following states:

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Indiabulls Power IPO

Business of Indiabulls Power

The Indiabulls Power IPO is another power IPO to hit the Indian market after the Adani Power IPO. Indiabulls Power IPO is from the promoters of the Indiabulls group, which have a large presence in the real estate sector.

Although Indiabulls Power was incorporated in 2007 and is relatively new, it has some 104 subsidiaries of its own through which it proposes to carry out its business (in addition to the parent). Most of these have the same registered office – E – 29, First Floor, Connaught Place, New Delhi and I wonder why Indiabulls Power needs so many subsidiaries.

Indiabulls Power is in the business of developing thermal and hydro power projects and it currently has the following projects under development. The Indiabulls IPO is planned to raise funds to partly finance these power projects.

Price Band and Open and Close Dates

The price band is set between 40 to 45 rupees. The IPO is scheduled to open on 12th Oct and close on 15th Oct.

IPO Grading

CRISIL has graded this IPO – 3 out of 5, which indicates average fundamentals relative to other stocks in India. The following factors influenced the IPO grading:

The company plans to operate in a sector that is expected to show good growth because of India’s growth rates and the resultant demand for power.
The strong track record of the promoters weighs the rating in their favor.
Negatives are that the promoters don’t have any experience in the power sector.
That they will have to depend on state electricity boards for offtake over the long term.
The returns on projects won through competitive bidding may not turn out be high due to the intense competition.

Indiabulls Power Thermal Projects

Name	Capacity	Commissioned by
Amravati Phase 1 Power Project	1,320 MW	First unit of 660 MW to be commissioned by June 2012 and full unit by September 2012
Nashik Power Project	1,335 MW	5 units of 135 MW to be commissioned by Sep 2011, 2 units of 330 MW to be commissioned by Feb 2012
Bhaiyathan Power Project	1,320 MW	660 MW to be commissioned by December 2012, fully commissioned by March 2013.
Amravati Phase 2 Power Project	1,320 MW	1^st unit of 660 MW to be commissioned by March 2013, fully commissioned by June 2013
Chhatisgarh Power Project	1,320 MW	660 MW by June 2013, fully commissioned by September 2013.

Indiabulls Power Hydro Projects: Indiabulls Power is planning to set up 4 medium sized hydro projects of 60 MW, 30 MW, 46 MW and 31 MW in Arunachal Pradesh.

Financials of Indiabulls Power

Since Indiabulls Power has still not commenced operations, I was surprised to see that it had any earnings at all. But it has earnings and here is the break-up of that income:

Particulars	For the year ended March 31^st 2009 (Rs. in millions)
Dividend Income	538.56
Interest on inter corporate deposits	627.11
Interest on fixed deposits	263.87
Interest on refund of bid deposits	40.61
Total	1,470.15

Looks like the subsidiaries are making money for the parent, but the earnings are not from the core business of the company, which is power generation and distribution, so there is not much to go by in terms of the earnings and financials of the company to evaluate the Indiabulls IPO.

Risks facing Indiabulls Power

Indiabulls Power doesn’t have any operating history and the company is new in this business.

The first power project of Indiabulls Power – Amaravati Phase 1 is scheduled to commence in September 2012. This is still some time away. Power projects have long gestation periods and it takes them a long time to get to the point where they generate positive cash flow. So the company is still a few years away from turning positive cash flows.

The other thing with power projects is that they are a capital intensive business. Indiabulls Power estimates that they need Rs. 310,524.00 million for the projects that they are developing. Delay in procuring financing or licensing will impact operations and ultimately profitability. Approximately 25% of the project is estimated to be financed from equity and the rest from debt. So, the company will be significantly debt – laden as well.

These projects require a large amount of coal and water. Indiabulls Power has gotten into agreements with various other entities for the allocation of these raw materials, but a change in the estimate v actuals, or unavailability of other raw material will significantly impact the company.

There is an income tax provision that allows companies which commence operations related to power generation 100% deduction in profits provided they commence before March 31, 2011. The current date of commencement for Indiabulls Power is after this date. If the government doesn’t extend the date, then Indiabulls Power stands at a significant disadvantage to other power players.

This is just a summary of the Indiabulls Power IPO from its prospectus filed with SEBI and is only meant to give you some details about the business of the company. This is not a buy or sell recommendation on the Indiabulls power IPO.

This site has regular features about IPOs, FDs and other investment ideas, if you would like to get that content by email, please click here.

JP Morgan JF Greater China Equity Offshore Fund NFO

JP Morgan Greater China mutual fund is a fund of funds. This means that it will not directly invest in stocks but invest in a mutual fund, which in turn invests in stocks.

The difference between the JP Morgan Greater China fund and most other fund of funds is that this fund will primarily be invested in just one mutual fund — JF Greater China Equity Fund. Normally, the fund will invest at least 80% of its assets with the JF Greater China Equity Fund.

The first thing I think about when I hear – fund of funds – is double fees. A fund of funds normally has its own fees and then because it invests in some other fund – investors are indirectly charged the fee of that fund as well.

In this case, JP Morgan JF Greater China fund charges an expense of 0.75% of net assets and then you will have to incur the expenses of the underlying fund – JF Greater China Equity fund.

Obviously that is not a good thing but I think this is the only fund that allows Indian investors to invest in Chinese companies and I’d like to hear if you are familiar with other funds which do that.

Since this fund invests in equities, it is saddled with all the usual risks that are faced by mutual funds that invest in equities. In addition to that there is a currency risk also, which is not very common for mutual funds in India. Since the fund is based in one country and invests in another, there are at least two currencies involved here and exchange rate fluctuation between the two currencies will impact your return. I say at least two currencies because the Chinese Yuan and Indian Rupee are involved at the minimum. I am not sure whether some transactions are going to be made in US Dollars or not.

The other thing about the JP Morgan Greater China fund is that since it invests in foreign securities, a SEBI cap of $300 million is applicable on the scheme. The cap means that the entire investment of the fund is limited to $300 million and can’t go beyond that. This cap is applicable on the mutual funds of the sponsor and not this particular scheme alone. That means there is a chance that you could get only pro rata allotment on this NFO. This is very normal for IPOs, but doesn’t happen a lot on New Fund Offers.

JP Morgan Greater China NFO Dates

This is an open ended equity fund whose NFO opened on 9^th July 2009 and will close on 31^st July 2009. The mutual fund will then trade from 28^th August 2009.

Minimum Application for JP Morgan Greater China NFO

The minimum application for this fund is Rs.10,000.

Benchmark for JP Morgan Greater China NFO

The benchmark for this scheme is the MSCI Golden Dragon Index.

Load Structure of JP Morgan Greater China NFO

There is an entry load of 2.25% when you invest less than 5 crores. There is an exit load of 1% if you are exiting the fund within two years of allotment and have bought it through a Systematic Investment Plan (SIP). The exit load is charged only if you exit within six months if you bought the fund in any way other than the SIP.

You can find the Key Information Memorandum and application form here.

This is just a summary of the JP Morgan Greater China NFO and is not a buy or sell recommendation on the mutual fund.

Raj Oil Mills IPO

Raj IPO: Price Band

Raj Oil IPO has declared that it has a price band between Rs. 100 and Rs.120.

Raj Oil IPO Date

Raj Oil IPO will open on Monday July 20, 2009 and close on Thursday July 23, 2009.

Business of Raj Oil Mills

Raj Oil is in the edible oil business and is engaged in crushing and oil filtration with a capacity of 5,000 TPA and 30,000 TPA. The company was incorporated in 2002, but the business itself has been running since 1959, when it was a partnership. The private company simply bought out the private firm and got access to all its assets and operations.

These are some brands that the company markets its products under:

Cocoraj (Coconut Oil)
Cocoraj Cool (Ayurvedic Oil)
Guinea Groundnut Oil (Double Filtered Oil)
Guinea Lite Groundnut Oil (Refined Oil)
Guinea Lite Sunflower Oil (Refined Oil)
Guinea Lite Cottonseed Oil (Refined Oil)
Guinea Lite Soyabean Oil (Refined Oil)
Tilraj Til Oil
Mustraj Mustard Oil
Cocoraj Jasmine

The brands are present in Western India, which is where the company has its major presence. The company plans to raise funds from this IPO to considerably expand its capacity. It currently has a crushing / filtering / refining capacity of 35,000 tons per annum (tpa) and it plans to increase it to 226,500 TPA.

This enhanced capacity will enable Raj Oils to enter the North Indian market by setting up plant in Jaipur, Rajasthan. It will also help it in backward integration, as it plans to enter into crushing of groundnut, mustard, and sesame seeds. It is currently dependent on suppliers for this function.

Raj IPO Grading

ICRA has graded Raj IPO 2 out 5, which means that the IPO has below average fundamentals. The things that weighed down the ratings were small scale of operation and the history of civil and criminal cases against the company. The other factors that weigh down against the rating is that the company is concentrated in the western region of the country and the market in which Raj Oil operates is highly competitive and scaling up involves several challenges.

Financials of Raj Oil Mills

In FY 2008, Raj Oil had a revenue of Rs.32,123.12 lacs, up from Rs.23,992.11 lacs in the year before and Rs.12,021.36 lacs in FY 2006. The Profit after Tax for the last three years has been Rs. 2,961.88 lacs, 1,815.20 lacs and Rs.672.41 lacs.

The EPS for the financial year 2008 was Rs. 11.87 and it was Rs.10.47 the year before and Rs.7.86 the year before that. If you take the EPS for the last year, the P/E multiple ranges from 8.42 to 10.11 for the upper and lower range of the Raj IPO.

Raj Oil IPO: Risk Factors

Here are some key risks as mentioned in the prospectus:

The company faces three criminal cases and one civil case. The company is also involved in legal proceedings with respect to tax demands.

The company has defaulted in terms of loan granted by Barclays PLC. It had taken a loan from Barclays for Rs. 1000 lacs and had to create a charge on its immovable property within 180 days. It didn’t do it and Barclays has asked Raj Oil to repay the outstanding Rs. 4.5 crores in two installments.

The promoters formed the company Raj Oil Mills and then it acquired the partnership firm of the promoters for Rs. 75 lacs. There is no non compete agreement and the promoters may start a similar business and then compete with Raj Oil Mills.

Another venture by the promoters known as M/s. Raj Builders incurred a loss of Rs.459.41 lacs in FY 2009 and Rs. 442.21 lacs in FY 2008.

There has been a negative cash flow from operations for Raj Oil Mills for the year ended December 31^st 2008 and as at January 31^st 2009.

This is not a buy or sell recommendation on the Raj Oil Mills IPO. This is just a summary of information based on the prospectus it filed with SEBI.

Excel Infoway IPO

Date and Price Band of Excel Infoway IPO

Excel Infoway IPO opens on 14^th July 2009 and closes on 17^th July, 2009. The price band for Excel IPO is between Rs. 80 and 85.

Excel Infoway IPO Grading

The Excel IPO has been graded 1 by CARE. This is a scale of 1 to 5, where 1 indicates that Excel Infoway has poor fundamentals.

Business of Excel Infoway

Excel Infoway is a BPO and Customer Contact Center, which has customers in the US and UK. The company’s customers are concentrated in the Telecom and Financial sectors. The company operates with a capacity of 150 seats, and the IPO is planned to set up 300 additional seats in the financial year 2010 – 2011.

Excel Infoway Risk Factors

Heavy Dependence of a Few Customers: The top 4 customers of Excel Infoway contributed 98.87% of the revenues of the company in fiscal 2009. This was up from 94.17% in fiscal 2008.

No Proven Track Record: Excel Customers was incorporated in 2003, and as such the company doesn’t have a long record of existence.

Negative Cash Flow: Excel Infoway had negative cash flow last year of Rs.344.5 lakhs.

Cost per seat higher than peers: Business of Excel Infoway: Interior & Furnishing Cost and Technology & Equipment Cost for setting up new facilities of 300 seats at two locations in Borivali and Kandivali in Mumbai will amount to Rs.2117.12 lakhs. Average Interior & Furnishing Cost and Technology & Equipment Cost per seat come to around Rs.7 lakhs. This is higher than the competitors of the company.

Financials of Excel Infoway

The company had revenues of Rs. 1860.73 lakhs in 2009, which declined from Rs. 2,310.89 lakhs in 2008 and 1979.0 lakhs in 2007.

The profit after tax for 2009, 2008 and 2007 has been Rs. 1485.07 lakhs, Rs. 1433.80 lakhs and Rs. 1537.98 lakhs.

The company saw a substantial increase in its debtors for the past few years. The company had debtors of 48.18% of sales for the last year and 38.06% for the year before that. This can be attributed to the recession because of which Excel Infoway had to extend credit facilities to its customers.

The company had a diluted EPS (weighted for last three years) of Rs. 9.56. Based on this the P/E Multiple at the higher end of the offering is 8.89 and at the lower end it is 8.36. Â

This is just a summary of Excel Infoway’s business, and is not a buy or sell recommendation on the IPO.

MIRAE Asset Short Term Bond Fund â€“ Mutual Fund NFO

MIRAE Asset Short Term Bond Fund: Type of Scheme

This is an open ended bond fund, and will hold a diversified portfolio of actively managed debt and money market funds. The underlying index is the CRISIL Short Term Bond Fund Index, and the fund’s performance should be benchmarked against this index.

The CRISIL Short Term Bond Fund Index (STBEX) returned 9.79% in the one year period from April 2008 – March 2009.

Now, I know that a lot of people equate bonds and debt to “risk free”, and shares or equity to “risky”, so let’s get this one thing out of the way first.

This is not a risk free investment and there is no guarantee of returns. Let me repeat that once more, there is no guarantee of returns if you invest in this scheme, just like there is no guarantee in other equity mutual funds. It is not the same as opening a fixed deposit in the State Bank of India.

You can think of it as less risky, but not risk free. The reason is that such funds allow you to diversify and reduce your exposure to equities.

For example, the underlying index of this fund returned 9.79% for the financial year 2008 – 09. In the same period, Nifty gave returns of – 38.87%.

Now, let’s take a look at where the MIRAE Asset Short Term bond fund will invest.

The fund will invest at least 20% of its assets in money market instruments and debt instruments, which have a remaining maturity of less than 182 days (about six months). Such investments are considered low risk.

The remaining funds (up to 80% of assets) will be invested in money market instruments and debt instruments, which have a remaining maturity of greater than 182 days.

To detail it out a bit further, the fund will invest in:

Securitized debt
Derivatives
Foreign Securities
Treasury Bills
Commercial Paper
Term Money
Certificate of Deposit
Government Securities with unexpired maturity of one year or less
Debt Obligations of the governments, public, private companies and financial institutions (among others).

Opening and Closing Dates of MIRAE Asset Short Term Bond Fund

The MIRAE NFO opened on 23^rd June 2009 and is going to close on 22^nd July. After that; the scheme will reopen on 12^th August 2009, for you to sell units, if you already bought them, and repurchase, if you don’t already have them, and are now interested.

Entry and Exit Loads of MIRAE NFO

The entry load is NIL.

There is an exit load of 0.25%, if you sell within 90 days of allotment.

The AMC estimates that the cost of running the fund (expense ratio) will be 2.25% of the weekly / daily average net assets for the regular plan and 2.10% for the institutional plan.

Minimum Investment for MIRAE NFO

The minimum amount that you can invest in the MIRAE NFO is Rs.5,000.

Scheme Types

There are Dividend and Growth types of this scheme. The dividend can be paid out monthly or quarterly (based on the surplus and discretion of the fund manager, no guarantees). There is also an option of reinvesting the dividend back in the scheme or reinvesting the dividend in other scheme of the mutual fund.

If you don’t specify which option you want, by default, you will get the growth option.

You can also get into a Systematic Investment Plan (SIP) for this MIRAE Asset plan.

Further Information

Here are links to the website of the fund and its key information memorandum.

Mahindra Holidays and Resorts IPO

Mahindra Holidays and Resorts IPO is going to open on June 23, 2009 and close on June 26, 2009. The price band of the IPO is between Rs. 275 to Rs.325. At this price level, the P/E Multiple of FY – 10 comes out between 23 – 27.

Fitch has rated the IPO 4 out 5 with 5 being the highest rating.

Business of Mahindra Holidays and Resorts

Mahindra Holidays and Resorts India Ltd. are in the business of leisure hospitality services in India and have the flagship service offering Club Mahindra Holidays.

They offer innovative services in the Indian holiday market which is known as vacation ownership memberships.

Club Mahindra Holiday Vacations

People can take membership of this scheme and members can choose to holiday in any of the predetermined resorts for a fixed number of days in a year for a fixed number of years. Currently Club Mahindra entitles its members to holiday in one of 23 resorts for seven days in a year, in the choice of the member’s season, and apartment style; for a period of 25 years.

While this is a relatively new service offering in the Indian markets as of May 31 2009, there were 91,997 members for Club Mahindra Holidays Vacation.

Zest

Other than Club Mahindra; the company launched Zest in November 2006 which is targeted at young urban families looking for small breaks. Zest members get an option to choose between 5 resorts, for 6 days each year, for a period of 10 years.

Club Mahindra Fundays

Club Mahindra Fundays was launched by the company in October 2006 and is targeted at corporate houses.

The membership in Club Mahindra Fundays entitles a company to send its employees on family holidays for a period of ten years.

Clubmahindra.travel

The company also launched clubmahindra.travel in April 2007 which is a one stop shop for travel and travel related holidays.

Mahindra Homestays

Homestays is a novel concept for the Indian market. It means that instead of staying in a hotel, you live with a host family. There will be comforts like ones in hotels, but, the core idea revolves around living in a house with a host family instead of a hotel.

This business model is different from traditional hotel business in the sense that the members pay an upfront fee and then an annual subscription. In return, they get to pick and choose between certain options and then stay there by paying additional cost for services and facilities. If you were a customer of a hotel, you will have to book a hotel and then pay for its stay every time. This is a relatively novel concept in India and Mahindra is the market leader in it, with a total of 72% of the total active membership in the vacation ownership industry. This number has grown at a CAGR of 32% over the last 3 years and they have been able to increase the price at a CAGR of 13.18% over the last three years too.

Mahindra Holidays and Resorts also have a fully integrated business model, where they market and promote their services, manage their resorts and also build them.

Financials of Mahindra Holidays and Resorts

The total revenues were Rs.442.12 crores for the year ended March 31, 2009 and grew from Rs.377.19 crores the year before and Rs.241.29 crores, the year before.

The net profit for the last three years was Rs. 79.80 crores, 84.03 crores and 42.52 crores. Mahindra Holidays also had a positive cash flow from operating activities, which is always a healthy sign. Simply, put – it made more money from running its business than spending it in the last five years. Mahindra Holidays generated Rs.158.36 crores from operating activities in 2009, 46.56 crores in 2008 and 69.05 crores in 2007.

The net worth of Mahindra Holidays was Rs.195.80 crores on March 31, 2009 and that comes down to Rs.24.99 per share. It’s also interesting to note that the cost of the share to the promoters is Rs. 4.12 per share.

Risks related to Mahindra Holidays and Resorts IPO

5 out of 8 directors have litigation pending against them. On top of the litigations against the directors, there are litigations against the company for their resort in Munnar, Income Tax proceedings, Consumer Complaints and Luxury tax proceeding.

Objectives of the IPO

Mahindra Holidays and Resorts is coming up with an IPO to raise funds for expansion of their existing resorts and setting up new projects. Here is a break-up of the resorts on which they intend to use the funding:

Ashtamudi (Kerala): 36.80 crores (existing)

Coorg (Karnataka): 16.31 crores (existing)

Ooty (Ooty Town): 12.17 crores (existing)

Tungi (Himachal Pradesh): 96.96 crores (new)

Theog (Maharashtra): 74.65 crores (new)

Conclusion

Mahindra Holidays and Resorts is one of the better IPOs to hit the market. It is in a growing sector with a novel concept and is a market leader in which it operates. If the IPO is reasonably priced, it can be a good pick in a portfolio of the long – term investor.

Disclaimer: This is not a buy or sell recommendation for this stock, just a summary of the business and my personal thoughts on it. If you are planning to buy or sell, please take advice specific to your financial situation and portfolio.

How to invest in Reliance Infrastructure NFO using ICICI Direct?

The minimum amount that you can invest in the Reliance Infrastructure Fund is Rs.5,000, so first make sure that you have allocated that much to your mutual funds.

To do that, login to your account, click on Equity –> Modify Allocation.

After that, add funds in the third row – “Mutual Funds, IPO, Tax, Insurance & Others”. You can do this by entering the amount you wish to invest in the “Amount” text box. After entering the amount, click on “Submit”.

You will see the message – “Your Allocation is Complete”.

Now click on Mutual Funds –> FMP / NFO

Now, based on your preference, you can select the Dividend or the Growth Plan and select on Purchase or SIP. If you want to set up a Systematic Investment Plan, click on SIP.

When you click on SIP, the following screen will appear and you can enter in the months you want to set this up for and the amount for that. After entering the amount, click on “Proceed for Confirmation” button and on the next screen confirm your transaction. The next screen also gives you an option to modify or confirm your transaction. These are the steps you need to take if you want to invest in the Reliance Infrastructure NFO using ICICI Direct. If you want to read about the details of this NFO, click here.

Disclosure: I will not be applying for this mutual fund.

This site has regular features about IPOs, FDs and other investment ideas, if you would like to get that content by email, pleaseÂ click here.