Category: IPO/NFO

Business of Fineotex Chemical

Fineotex chemical is engaged in the business of manufacturing specialty chemicals and enzymes for the textile and garment industry, construction industry, leather industry, water treatment industry, agrochemicals, adhesives and others.

Specialty chemicals are usually based on customer specification which cater to specific needs of an industry and thereby are low volume and high price business.

Fineotex was incorporated in 2004 and the company has its manufacturing unit in Mahape in Navi Mumbai. Some of the major customers of Fineotex are Clariant India Limited, BASF group, Pidilite, Bombay Dyeing, Raymond, Grasim among others.

Financials of Fineotex Chemical

The turnover for the period ending 31^st March 2007 was Rs. 105.07 lakhs and for the nine months ended 30.09.07 was Rs.1364.90 lakhs. The profit after tax for the corresponding period was Rs.0.26 lakhs and Rs.179.90 lakhs. The EPS of Fineotex for the year 2006-07 was Rs.1.77 and there was a loss for the prior two years for which the EPS was Rs. (0.30) and Rs. (0.40).

Fineotex is offering its shares between Rs.35 and Rs.42. So the P/E multiple would be roughly 24 based on the last year’s EPS and the higher end of the band of Rs.42.

Objects of the Issue

Fineotex is raising money in the IPO to set up a manufacturing facility of 13,125 MT / annum which will produce specialty chemicals targeted at construction, textile and garment, leather and water treatment industry. The estimated expense for this facility is Rs. 714 lakhs.

Other than this the company plans to set up a sales office in Mumbai which is estimated to cost Rs.180 lakhs and raising margin money for the working capital requirements which is expected to be Rs.208 lakhs.

Key Risk facing Fineotex

The key risks facing Fineotex is that the company has been making negative cash flows since its inception in 2004 and losses from inception till the year 2006.

Essentially the limited history of operations of the company makes it harder for investors to accurately judge the real potential of growth of the company and what would a fair price for such a company be.

Business of JSW Energy

JSW Energy is part of the O.P. Jindal Group and this particular company comes under the umbrella of of the JSW Group. JSW Energy was incorporated in 1994 and derives most of its revenues from power generation. JSW Energy currently owns and operates a 260 MW power plant in Karnataka. The company is further expanding its capacity by 3410 MW by constructing and implementing five more power plants in Karnataka, Maharashtra, Rajasthan and Himachal Pradesh.

Apart from power generation JSW energy has also been engaged in power trading since June 2006 and according to CERC is one of the top five energy trading company in India. As next steps JSW energy plans to enter transmission business and for this purpose has created subsidiary.

Financials of JSW Energy

The consolidated revenues of JSW Energy have grown from Rs.5,505.28 million for the year ended 2003 to Rs.8115.48 million in the year ended 2007 at a CAGR of 8.07%. The profits after tax have grown from Rs.214.63 million to Rs. 2904.5 million in the same period at a CAGR of 68.38%.

The EPS for the last three years was Rs.6.38 in 2007, Rs.3.11 in 2006 and Rs. 3.80 in 2005. The RONW for 2007 was 26.59% and for 2006 it was 13.71%.

Objects of the Issue

JSW Energy will use the IPO proceeds primarily to fund the five power projects totaling to 3410 MW mentioned above, it has earmarked a sum of Rs.29186.50 million for this purpose. Apart from this the company would also repay debt worth Rs.6000 million using the proceeds of the IPO.

Key Risks

The company’s financial performance is based on the only operational plant which is the 260 MW power plant. However JSW has a lot of projects underway which are at initial stages and have long gestation periods. Given this scenario the historical financial performance may not accurately forecast the future performance.

The power plants are dependent on various different kind of fuels and JSW relies on a few power suppliers in China, Indonesia and Mozambique. These companies have a limited track record and it becomes difficult to enforce fuel supply agreements if the suppliers fail to carry out their obligation.

Business of Ashoka Buildcon

Ashoka Buildcon is in the business of building and operating roads and bridges in India on a built – operate – transfer mode. The company has been organized in four divisions which are the BOT Division, the engineering, procurement and construction division (EPC) which does the designing, procurement of raw materials and construction of roads, bridges, commercial, industrial and institutional buildings. The other two divisions of the company are the RMC division which sells ready to mix concrete (RMC) and bitumen and then the toll collection contract division which collects tolls on roads owned and constructed by third parties.

Ashoka Buildcon was awarded its first BOT contract in 1997 which was the Dhule Bypass in Maharashtra and the company has been in the construction business since 1976. The company right now has operations in MP, Maharashtra, Chhattisgarh, Rajasthan, Gujarat, Goa, Tamil Nadu, NCR, Dadra and Nagar Haveli and Daman and Diu. Ashoka Buildcon is operating or has interests through joint ventures, subsidiaries and associate companies in 21 roads and bridges as of date.

Financials of Ashoka BuildCon

The company has steadily grown in revenues and from total revenues of Rs. 1568.34 million in fiscal 2003 it has grown to Rs.3711.61 million for the year ended March 2007 at a CAGR of 24%. However this figure must be looked at keeping in mind that the company grew its revenues by 106% in just the last year from Rs.1797.01 million to Rs.3711.61 million.

The profit after tax have also grown steadily at a CAGR of 55% from Rs.25.57 million in the year 2003 to Rs.147.38 million in the year 2007 and it has only declined once in that period when it came down to Rs.85.88 million in the year 2006 from Rs.113.46 million in the year 2005.

The P/E multiple for the years ended 2005, 06 and 07 were Rs.3.11, Rs.1.41 and Rs.6.24 respectively.

Objects of the Issue

Ashoka Buildcon intends to raise funds from the IPO in order to contribute a part of funds required by Ashoka Highways (Bhandara) Limited which is Ashoka’s subsidiary and has been formed in order to construct, operate and maintain 320 km 4 lane section of NH 6. Ashoka Buildcon estimates to spend Rs. 1250 million on this.

The other key area where the proceeds from the IPO would be spent are funding subsidiaries for repayment of debt for which funds Rs.731.14 million are earmarked and then investing in capital equipment for which Rs.300.15 million is earmarked.

Business of Sea TV Network

Sea TV Network is an Agra based company which is in the cable TV business and is a Multi System Operator. A Multi System Operator or MSO is a company which operates multiple cable TV systems and serves many localities.

Sea TV Network is one of the two existing MSOs in Agra which provides services to various local cable TV operators of Agra. Sea TV also has its own TV channels, which focus on the city and state news and events and the content of this is created in house. The company provides these channels free to their subscribers.

Sea TV now wishes expand its presence and emerge as an All India MSO and also has expansion plans which focus on setting up network for CAS, complete IPTV solution, underground optical fibre network throughout agra and adjoining areas and setting up 20 branch offices in Agra in order to reach directly the end customers and reducing their dependence on the local cable operators.

Financials of Sea TV Network

The revenues for the year ended 2005 was Rs.1.46 lakhs, for 2006 it grew to Rs.175.05 lakhs and for 2007 it was Rs.453.13 lakhs. The profit after taxes for the year ended 2006 was Rs. 2.31 lakhs and the year ended 2007 it was Rs. 18.07 lakhs.

The EPS for the last three years starting from 2007 was Rs.30.25, 4.65 and (0.12) respectively.

Key Risks

There are certain income tax litigations against the directors of the company and in case they are decided against them there could be adverse impact on the business.

Delay in project implementation could cause adverse impact on the business as there are significant capital expenditures which have been planned by the company and the company needs statutory approvals in order to commence laying underground optic fibre. Therefore there are financial risks with implementation delays and there are external factors which could cause these delays.

Inability to manage the growth of the business is another key risk. The promoters have been in this line of business for close to 15 years however they do not have prior experience in managing the kind of growth that is being envisaged by the company.

The current premises from which the company operates are residential premises and if the state government takes any action in terms of sealing the property it would cause disruption of business for the company.

Business of Euro Multivision Limited

 

 
Euro Mutlivision is the second largest company in India which manufactures CDs and DVDs. The company was incorporated in April 2004 and commenced production in April 2005 with five manufacturing lines and a capacity of 720 lakh units of CDs and 72 lakh units of DVDs. Currently the company has expanded by adding five more production lines and has capacity of 1800 lakhs CDs.  
Euro Multivision now proposes to enter a new business which is manufacturing solar cells for electricity generation. The company plans to build a photovoltaic solar cell manufacturing unit with a capacity of 40 MW per year at a total cost of Rs.16756 lakhs in Kutch District in Gujarat. The proceeds from the IPO will go towards this project. The manufacturing unit is proposed to be set in a SEZ and as such would qualify from all the exemptions that are available for a SEZ.  

 

 
Financials of Euro Multivision

 

 
Since the company commenced its commercial operations recently there is not a lot of financial history to go by with, the total income for fiscal 2006 was Rs. 4476.45 lakhs and for fiscal 2007 it was Rs.5914.47 lakhs. The profit after tax for these two years was a loss of Rs. 128.69 lakhs and Rs. 619.07 lakhs respectively. The EPS for the fiscal 2007 was Rs.7.30 and for the year before that was a loss of Rs.1.58 per share.

 

 
Key Risks

 

 
Euro Multivision is entering a completely new line of business in which it has no prior experience and would face stiff competition from existing and new players in the business.

 
For setting up the proposed manufacturing plant the company has bought agricultural land and has applied for the conversion of this agricultural land to industrial land which has not yet been approved.
 

For the expansion into this new line of business Euro Multivision is totally dependent on the success of this IPO and in a situation where the IPO does not yield the funds for the project, right now there are no alternate source of funds identified.

 

The company has made a loss in one out of its two years of operations, which was fiscal 2006 where the company incurred a loss of Rs. 128.69 lakhs.

Business of Birla Cotsyn Limited

 
Birla Cotsyn belongs to the Yash Birla group which is one of the leading industrial groups in the country. There has been a joint venture agreement between the Yash Birla Group and the PB Bhardwaj Group and consequently the total promter’s part of the equity will be shared between these two groups in a ratio of 50:50.

 
The company is engaged in cotton ginning, pressing and oil expelling. The company is presently focusing on expansion activities at a total estimated cost of Rs.28919 lakhs. Birla Cotsyn has plans of expanding the spindle capacity for manufacture of synthetic yarn, setting up a 36000 cotton spindle yarn manufacturing facility, manufacture of open end rotor based cotton yarn, manufacture of finished cloth by setting up a dyeing and manufacturing unit.

 
Birla Cotsyn also has plans to set up retail outlets and setting up facilities for garment and apparel manufacturing. The huge size of the project has led to its being granted the status of a Mega Project by the Government of Maharashtra as a result of which Birla Cotsyn enjoys several benefits like electricity duty exemption for a period of seven years, 100% exemption of stamp duty, industrial promotion subsidy equivalent to 100% of eligible investments and 75% reimbursement of expenditure incurred on account of employer’s contribution towards ESI and EPF for a period of 5 years subject to certain limits.

 
Financials of Birla Cotsyn Limited

 
Birla Cotsyn has shown a significant jump in its sales and profit figures in the past year, where the revenues were Rs.40.43 million for the year ended March 31^st 2006, it jumped to Rs.561.48 million for the year ended March 31^st 2007. Similarly the profits increased from Rs. Rs.2.71 million to Rs.25.69 million in the corresponding period. The EPS for the last three years has been Rs.1.89 in 2007, Rs.0.20 in 2006 and Rs.0.04 the year before.

 
Summary

 
The issue comes from a well respected industrial house of the country however as the financials state the company has just about increased its revenues many folds in the past one year and has plans to go on a major expansion drive make it difficult to rely on past performance to make a future judgment.

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.