Wednesday, August 23, 2006

Naya Issue: Voltamp Transformers

Type of Issue:Book Built
Issue Opens:24 August, 2006
Issue Closes:29 August, 2006
Issue Size:4,883,840 (No. of Shares)

Focused on supplying to industries

Voltamp Transformers manufactures transformers. It has a capacity of 5,400 MVA capable of manufacturing transformers up to 50MVA / 132 KV class. It essentially focuses on industry segment and supplies to customers like Reliance industries, Jindal Steel, Siemens, ABB, Larsen & Toubro, Suzlon for applications in industries like petrochemicals, oil refining, cement, paper, pharmaceuticals, steel, and power plant. Building and service sector projects (17% of total sales) and the steel and metal (16% of total sales) industry are the main user industries.

As per an arrangement dated 5 December 2005 between Lalitkumar H Patel and Kunjal L Patel (continuing promoters) and Navinchandra R Patel, Bharat N Patel, Rashmikant Patel and Udyan Patel (selling shareholders), the selling shareholders will sell their entire 48.27% equity stake though the present offer for sale to exit from the company. No details about why they are exiting and whether they can compete with the company in future are given in the prospectus.

Strengths
* As on June 2006, Voltamp Transformers had an order book position of Rs 248 crore. The industry segment to which the company supplies and the power sector to which it can supply in a bigger way in future are doing well and have good growth prospects due to large capex planned in various industries and the power sector.

Weaknesses
* Voltamp Transformers had negative cash flows from operating activities in FY 2006 and FY 2003 due to large funds blocked in inventories, negating the benefit of lower credit periods associated with the industry segment (compared with the state electricity boards).
* A few raw materials such as CRGO, copper, oil, insulation, resin, and steel constitute over 70% of the sales revenue. Most of the raw material contracts entered by the company allow for cost escalation, but its contracts with customer usually have a committed price. If prices of raw materials continue surge, as they have been in the recent past, then its financial performance may come under stress.

Valuation
Net profit in FY 2006 was Rs 70.55 crore. EPS based on net profit before extraordinary items (EO) works out to Rs 22.8. At the offer price band of Rs 295-345, the PE range work out between 12.9 and 15.1, respectively. TTM P/E of the Electric Equipment – Transformers sector is around 15.4. Voltamp Transformers is operating at 83% capacity utilisation and as of now does not have any expansion plans nor it is going to get any money from the present offer.

For More Information Click Here
To View Prospectus Click Here

Wednesday, August 16, 2006

Cairn to get desi identity via mega IPO

When a chief executive of a growing oil driller turns up wearing a horseshoe motif tie and an oversized Tissot, it certainly belies a wish for dame luck and a flaring ambition. So, when Rahul Dhir, barely four months in the CEO hot seat at Cairn Energy India, says that the Scottish explorer’s new strategy is basically an application for Indian citizenship, you know he requires both in equal measure.

The first step in the $6.5 billion Cairn’s strategy to become Indian is an initial public offer that is likely to open sometime late this year or early next. “Essentially we want to become an Indian company,’’ Dhir says. “Since 90% of our assets are in this country, it only made sense that the Indian public had a share in it.’’ Cairn, which has its largest block acreage of nearly 8,000 sq km in Rajasthan, made India’s biggest oil discovery in 22 years there. Named Mangala, the wells in the field are expected to pump 1-1 .1 lakh barrels of oil per day when production begins .

The company found recoverable oil reserves in 17 different locations in the desert. The fields are estimated to contain a total of 3.5 billion barrels of crude oil and are expected to yield 1.5 lakh barrels of oil per day for at least 25 years. Cairn is producing oil from its Ravva fields and gas in the Krishna-Godavari basin, both off the Andhra Pradesh coast and Cambay basin on the western coast of Gujarat.

The Indian assets have burnished the company’s blue-chip status in the FTSE 100 in London. Dhir did not reveal how much of the company’s equity will be offered to investors here. Investment banking sources say that the equity offer could be one of the largest ever in India—something upwards of Rs 15,000 crore or $3.5 billion. Cairn, however, did not confirm the figure. Neither did it deny. “Honestly , we are yet to work out all those details,’’ said David Nisbet, director of communications at Cairn, who has shifted base to New Delhi before the action hots up.

The company also does not share how the money raised would be used. “We recently tied up a $1 billion credit from a group of banks in London. Besides, the cash flows from our fields are strong. But if equity money is available, we would not draw down from the credit lines,’’ Dhir, an advisor to oil companies in his previous role as investment banker with Merrill Lynch, said.

Cairn, however, may have some reason to worry about its Rajasthan fields. India’s biggest oil explorer, state-owned ONGC, has shelved plans for a well-head refinery, with a likely equity participation of Cairn, in Rajasthan after the government discouraged it from going into downstream oil businesses of refining and retailing. It has also reportedly shelved plans for a refinery in Kakinada in Andhra Pradesh. ONGC chairman RS Sharma, however, denied that the plans have been dropped. “We have not yet taken a decision. The feasibility studies are still on. A decision is possible only after that,’’ Sharma told ToI.

Talk within the company, however, is that the decision to not set up the refineries was taken at a mid-July business planning meeting. The other option that the oil producer has is to pipe the oil to its refinery at Mangalore. Even that is now seen as unviable unless Cairn too participates in building the pipeline or sells oil at a discount. The low-grade , waxy crude in the Rajasthan fields does not flow easily and the pipelines have to be jacketed with special material to raise the temperature. That would, however, increase the cost substantially.

Nisbet says the company is continuing to hold talks on various issues and is optimistic everything will be sorted out by the time it is ready for production in a couple of years. “India needs oil. Ultimately , it is beneficial to the state and the people,’’ he said, dodging a question whether the company could face problems in selling the oil.

An industry insider says Cairn could be selling equity to build its own refinery in Rajasthan. He said the company had told the government of its intent of setting up one. Nisbet declined to confirm it. “It is an option. I cannot say anything beyond that,’’ he said. He, however , added that Cairn’s job was producing oil. “It is up to the state and others to decide what to do with it,’’ he added.

While India today has more refining capacity than it requires, the business is on an upswing with refining margins going through the roof. Reliance’s Jamnagar refinery, for instance, had reported margins of over $13 in the first quarter. Globally, refineries capable of cracking low-grade crude are relatively few in number and the requirement is increasing as most new finds have oil deposits that have a high sulphur content.

The scenario presents a good business opportunity for Cairn Energy if it were to build a complex refinery at its wellhead in Rajasthan, given that it has large reserves there.

“We have enough oil to take us through at least until the middle of the next decade. Besides, we are drilling in several other places that could potentially yield oil,’’ says Dhir, who started his career as an oil and gas reservoir engineer at ONGC. Dhir’s engineering and finance background are ideal for a company like Cairn, which depends on technological prowess and financial discipline for growth. But his horse-shoe tie may have a larger role to play as Cairn begins life as a local company in the Indian economic and political milieu.

Wednesday, July 05, 2006

Realty cos vie for FII placement

The recent green signal for participation by foreign institutional investors (FIIs) in the proposed IPOs and pre-IPO placements of DLF and Parasvnath has led to a scramble among real estate companies.

A number of companies, including Ansal Properties & Infrastructure and the Pirmal-Morajee combine’s Peninsula Land, have sought permission for selling equity to FIIs through IPOs and pre-IPO placements.The department of industrial policy & promotion (DIPP) has received communications from various players, including the Bangalore-based Sobha Developers and the Mumbai-based Akruti Nirman, according to government sources. Some of these players have sought permission for FII participation in follow-on public offer (FPO) and qualified institutional placements (QIP), the sources said.

DLF, which has filed a Red Herring prospectus with Securities and Exchange Board of India ((Sebi) for its proposed IPO, was the first to seek clarification on FII participation in its IPO and pre-IPO placements. The DIPP then clarified that FIIs are allowed to participate in the placements, and a copy of the clarification was sent to the RBI.

The apex bank said FII participation could be allowed in both IPO and pre-IPO placements, subject to lock-in requirements of Sebi.In the meanwhile, Parasvnath had also sought a similar clarification and DIPP replied in the affirmative. Seeing a new window opening up, a number of companies have sent requests to the DIPP. Sources said Ansal Properties & Infrastructure, Peninsula Land, Sobha Developers and Akruti Nirman are among those who have sought clarification on FII investment in real estate firms.

The clarifications were necessary due to the regulations laid down under Press Note 2 of the DIPP, which allows foreign investment in real estate subject to minimum built-up area and capitalisation norms.

Since FIIs would be able to purchase shares of real estate companies once they are listed, the DIPP felt it was okay to allow realty players to go ahead with FII participation in IPO and pre-IPO placements.

While real estate companies are obtaining clearance in advance, it is not clear how many of them would actually attract FII investments. Since the stock market is going through fluctuations, it might take more time for real estate companies to launch large IPOs of the type planned by DLF.In view of the not-so-buoyant sentiment, the FII role could be crucial in deciding the fate of realty IPOs.

DLF IPO may be delayed by 2 mths

Real estate developer DLF Universal’s mega initial public offer slated for mid-July is set to be delayed by at least a couple of months. As things stand now, the delay may not be prolonged, provided the company redresses residual investors’ grievances, which the company affairs ministry is looking into.

Capital market regulator Sebi had referred a decision on clearing DLF’s public offer to the company affairs ministry (MCA). DLF is expected to look at a fresh date, most likely in September-October.A quick resolution of the last minute glitch in its estimated Rs 13,000 crore public offer looks possible as the government does not intend to institute an inspection or an investigation into the affairs of the company under company law provisions. “We follow a laid down procedure to redress investor grievances.

We would ask the firm to redress these issues at the earliest,” said a government source. The ministry’s next move would depend on how quickly the company responds to its request.

Launching an inspection or an investigation into the affairs of the company under section 209 or section 235 of the Companies Act would have proved damaging to the firm’s plans to go ahead with India’s biggest issue so far.Company sources told ET that talks are currently on with the disgruntled group of minority shareholders and that all outstanding issues would be resolved soon.

Sources in investment banking circles said that the group would now have to take a fresh look at its valuation and IPO size, apart from coming out with a new deadline for the issue.

Monday, July 03, 2006

DLF to invest Rs 30000cr in retail space by 2015

Real estate major DLF has chalked out an aggressive expansion plan to invest Rs 30,000 crore (Rs 300 billion) by 2015, for developing 100 million square feet retail space.

The capital-based DLF, which is coming out with perhaps the country's largest initial public offer, IPO to raise more than Rs 10,500 crore (Rs 105 billion), has already started working on its upcoming 34 shopping malls covering 21 million sq ft.These commercial retail space projects are under various stages of implementation, a company official said.The demand for retail space, both from the organised and unorganised sector, in the country is pegged at 1,300-1,450 million sq ft by 2015, the company's internal report said.

DLF is eyeing to capture 5% share of retail space in the next ten years across the country.It is banking on the rapid growth in organised retail sector, which is expected to go upto 45-50 billion dollars in 2015 from just 7-8 billion dollars in 2005, the report added.

Infact, one of the objectives of the company to go public is to raise funds for acquiring land, part of which would be used for developing malls in future. It has made partial payments to acquire 2,893 acres in 62 cities.

The company has made an elaborate plan to develop 100 million sq ft retail space by 2015 under six different formats- prime downtown shopping districts, shopping centres, standalone stores, neighborhood malls, destination malls and super luxury malls.

As per the company's plans, 40 malls would be developed under prime downtown shopping districts format, to be located in prime shopping areas and each having a size of three to five lakh sq ft.

Thursday, June 29, 2006

Naya Issue: SHIRDI INDUSTRIES LTD

Type of Issue:Book Built
Issue Opens:29 June, 2006
Issue Closes:05 July, 2006
Issue Size:6,500,000 (No. of Shares)

Background :
* Shirdi Industries Ltd. (SIL) was incorporated in the year 1993 as Shirdi International Engineers Pvt. Ltd. Its name was changed to Shirdi Industries Pvt. Ltd. on 9th May 1997 and was subsequently converted into a Public Ltd. company as on 12th June 1997. It is a part of the ASIS Group.
* SIL is an interior solution company set up for trading consultancy services & other allied activities. It has diversified in local trading of products required for interior furnishing such as Particle Board (PB) Medium Density Fibre (MDF) board, plywood and veneer. Trading activities contributed up to 80% and 70% of total revenue in FY2005 and FY2006 respectively.
* The company started manufacturing door skin, panel doors and furniture components in October 2003. Its existing plant is in Mumbai.
* SIL does not have an internal sales network. The company distributes its products through dealer channel only. It has a wide distribution network of over 550 dealers spread all over India with godowns and branches in Hyderabad and New Delhi.

Object of the issue :
The project cost of the company is Rs. 127.41crore. The objects are
* Manufacture of MDF and Particle Board (Plain & Pre-laminated).
* Manufacture of flooring, door-skins, laminates, door and furniture components.
* Meet Issue expenses.

Strength :
* As a part of its expansion plan, SIL is setting up a new manufacturing unit in Uttaranchal. The plant would have an installed capacity of 48.58 lakh square meters per annum of MDF boards, 50.52 lakh square meters per annum of PB and also additional capacities for production of flooring, laminated doors and furniture components.
* SIL would enjoy tax benefits as Uttaranchal has a location advantage like exemption of excise duty for 10 years and income tax for 5 years from the date of commencement of production.
* The major raw material for manufacture of MDF and PB is wood waste. The same is readily available in Uttaranchal. In the manufacturing of MDF & PB, over 95% of the wood available from a tree is utilized as against less than 60% in the case of items made out of timber or plywood.
* Shirdi Industries will be the only player in domestic market having a fully integrated manufacturing facility of both products i.e. MDF and PB. Its comparable peers like Mangalam Timber Products Ltd. and Nuchem Ltd. have limited capacity for MDF only.
* Contribution of manufacturing revenue to total income has increased to 25% i.e. Rs.1,354 lakhs in FY2006. Manufacturing revenue has increased by 113% over FY2005.
* Revenue of the company in FY2006 grew by 30.79% over FY2005 from Rs.4,036.87 lakhs to Rs.5,279.93 lakhs. Net profits also increased by 238.21% during the same period from Rs.133.38 lakhs to Rs.451.11 lakhs. The increase in net profits was primarily on account of increase in manufacturing revenue.
* All the proposed products to be manufactured by SIL are eco-friendly products. The demand for such products will increase due to lower costs, ease of use and adaptability and also due to less availability of plywood in near future on account of orders from Supreme Court of India where many wood based industries have been ordered for closure.

Weakness :
* SIL currently imports MDF and PB for its trading activities. This involves high cost of duties and logistics.
* SIL imports raw material from China, South East Asia and Europe. Proposed plant is located away from seaport, which would result in high transportation cost and lead-time. This would hamper the profitability of the company.
* Group companies like Asis Industries (P) Ltd., Asis Global Ltd. and Asis Overseas Ltd. are in the same line of business. The promoters had started two partnership firms M/s Shirdi International and M/s A. S. Industrial Services. However, these were dissolved in 2004 due to conflict of interest with group companies engaged in similar activities.

Valuation :
* The Revenue of the company has grown at a CAGR of 10.16% from Rs.3,585 lakhs to Rs.5,280 lakhs in FY2002 to FY2006 . Net profits for the same period have grown at a CAGR of 164% from Rs.9.25 lakhs to Rs.451.11 lakhs.
* EPS for FY2006 is Rs.2.44. Post issue EPS is Rs.1.8. Post issue P/E will be in the range of 38 to 43 for the price band of Rs.69 to Rs.78. Industry average P/E is 13.26.
* Return on net worth has increased from 5.94% in FY2005 to Rs.11.64% in FY2006. Networth of SIL is Rs.3,834 lakhs for FY2006.

For More Information CLICK HERE
To View Prospectus CLICK HERE

Tuesday, June 27, 2006

Sebi to meet by mid-July to decide on retail quotas in IPOs

The Securities and Exchange Board of India, Sebi, said 40% of real estate mutual funds can be invested in shares/securities of real estate firms.The board will meet by mid-July to decide on short selling, retail quotas in IPOs. They have circulated a draft on the pros and cons of retail quotas in IPOs.They will decide on short selling after considering the latest practices in the United States

Sebi exempts VC funds from lock-in period during an IPO

The Securities and Exchange Board of India, Sebi, approved guidelines for real estate mutual funds, allowing them to invest directly in real estate properties in India, reports The Hindu Business Line.These funds would initially be close-ended schemes. Their units would be compulsorily listed on the stock exchanges and NAVs of the schemes would be declared daily.

Investment norms
Apart from real estate properties in India, the schemes can invest in mortgage (housing lease) backed securities, and equity shares/bonds/debentures of listed and unlisted companies dealing in properties and undertake property development, the Sebi said after its board meeting today.

The board also decided to exempt venture capital (VC) funds and foreign venture capital investors from the lock-in period during an IPO only if they hold shares in that company for a period of at least one year at the time of filing draft prospectus with the Sebi.

This would help to ensure that only those who invest in the company with a long term perspective would be allowed to get the benefit of exemption from requirement of lock-in period. Ashwin Ramesh, Director, Primary Real Estate Advisors of Quantum Real Estate Funds, said: "We will consider real estate since we have been raising funds overseas to invest in the Indian real estate market. However, we are not sure how convenient it would be to list NAVs every day."Dhirendra Kumar, CEO and managing director of Value Research, said: "Tradability issues would be a concern since the underlying market still has to evolve."

Custodian of securities
The funds would be required to appoint a custodian who has been granted a certificate of registration to carry on the business of custodian of securities by the board.

A P Kurien, chairman of AMFI, said: "This is a welcome development for the mutual fund industry which enables common investors to participate in real estate."

Monday, June 26, 2006

Sebi to review retail quotas in IPOs

The Sebi Board is meeting today to discuss delivery-based settlement of derivatives and short selling, CNBC-TV18 reports.The two key issues the market is expecting Sebi Board to address in this meet is the current IPO infrastructure and IPO norms and whether stock lending and borrowing and physical settlements of derivatives will be permitted in the Indian market.

They may also review retail quotas in IPOs, though it is not known whether they are considering revising it downward or upwards.The other issue, which is of great importance and on which perhaps the board will take its call, is whether stock lending and borrowing and physical settlements of derivatives will be permitted in the Indian market or not.

It is seen that over the past month-month and a half, a lot of market participants have suggested that such a system should come in place, as it helps during market volatility.

Shirdi Ind plans Rs 50cr IPO, issue opens on June 29

Housing interior furnishing products manufacturer Shirdi Industries, SIL, a division of the ASIS Group, is entering the capital market with an initial public offering of 65 lakh equity shares of Rs 10 each at a price band of Rs 69-78 per share.

The issue opens on June 29 and closes on July 05.The company is planning to raise Rs 50 crore (Rs 500 million) with its initial public offer to part finance its expansion programme of Rs 127.4 crore (Rs 1.27 billion), which is being undertaken in Uttaranchal.

"We are setting up additional capacities for manufacture of medium density fibre board, particle board to touch a total of about 10 million square metres," ASIS Group director Rakesh Agarwal said.It is also setting up new capacities of pre-laminated board.

"Already we have secured loans from banks aggregating Rs 56.5 crore (Rs 565 million). With the funds raised from the IPO we expect to complete the expansion and set it on-stream by December this year," he said.After the IPO, the promoter holding in the company would be diluted to 65.38% from the current holding of 88.43%, he said.

SIL registered a net profit of Rs 4.5 crore (Rs 45 million) for the year ended March 2006 over a total income of Rs 52.78 crore (Rs 527.8 million).Allianz Securities is the book running lead manager and Intime Spectrum Registry is the registrar to the issue.