Acropetal Technologies IPO – Investors Avoid – Traders- Wait & Watch

February 21, 2011   ·   3 Comments

www.stockssavvy.comIssue Details:  Acropetal Technologies Ltd is mid-tier IT services and products firm which offers Information Technology (IT) outsourcing services to clients in Engineering Design Services, Healthcare, and Energy and Environment sectors.

Acropetal offers Engineering Design Services to reduce product design cycle time and costs. The services include concept design, product design & development, advanced analysis, reliability engineering and value engineering. Other services are product quality improvement, idea generation, product teardown, material cost out, product re-design, back office support to accomplish 2D Drawings, Data Conversion and 3D Modeling.

IPO Snapshot:

  »»  Issue Open: Feb 21, 2011 – Feb 24, 2011
  »»  Issue Type: 100% Book Built Issue IPO
  »»  Issue Size: Equity Shares of Rs. 10
  »»  Issue Size: Rs. 170.00 Crore
  »»  Face Value: Rs. 10 Per Equity Share
  »»  Issue Price: Rs. 88 – Rs. 90 Per Equity Share
  »»  Market Lot: 60 Shares
  »»  Minimum Order Quantity: 60 Shares
  »»  Listing At: BSE, NSE

Rating by ICRA: 3

Objective of the Issue:

 The objective of the Issue are:

1. To finance the funds required for potential acquisitions;
2. To set up a Software Development Center cum Corporate Office at Hosur Road, Bangalore;
3. Expansion & Establishment of overseas offices;
4. Part Repayment of Term Loans;
5. Additional Working Capital requirements;
6. General Corporate Purposes;
7. Meeting public Issue expenses.

Company Financials:

 

Particulars For the year/period ended (in Rs. Lacs)
  31-Dec-10 31-Mar-10 31-Mar-09 31-Mar-08 31-Mar-07 31-Mar-06
Total Income 10,637.45 10,808.51 9,280.49 5,970.03 4,093.65 709.71
Profit After Tax (PAT) 1813.26 1,955.09 1,658.58 1,306.37 1,277.59 250.89

Company Analysis:

Additionally, the company’s customer base is quite small and concentrated. On a standalone basis, top 5 customers contributed 54.88% while top 10 customers accounted for 87.10% of operating income for 9mFY11.

Coming on to the valuations of the primary offering, at the upper band of 90, share is being issued at pre-money PE multiple of 4.74x, based on estimated FY11 EPS of Rs. 19, given Rs. 14.20 has been earned on per share basis in first nine months of fiscal 2011. This is not very attractive given that other smaller IT companies such as Nucleus Software and Omnitech are ruling at PE multiples of 3-4x, thus not leaving much on the table for the IPO investors. 

 Company Reviews:

 Moreover, on annual sales of Rs. 200 crore, the company is seeking post-listing market cap of Rs. 350 crore and EV of Rs. 443 crore, at upper band of Rs. 90. This is a very steep asking price, given the uncertain secondary market conditions as well as company- specific concerns like expiry of tax holiday in the next 2 months, high interest burden and heavy promoter dilution.

Verdict: There are lot of Mid Cap IT Companies which is Double the Market Cap of Acropetal Technolgies which are trading at Same or less P/E as of Acropetal Tech. Investors should stay away from the Issue. Flippers may make some money if the Issues gets highly Over Subscribed by HNI’s so wait & watch till Last Date & Subscribe accordingly.

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Rajesh Singla

Rajesh is the founder & CEO of Stockssavvy, Stocks analyst,financial advisor by choice,software engineer by fate,biker,gamer,cricket lover n enthusiastic person. He believes in doing things not just to get by but to get Ahead...

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  • vikash kumar gupta

    Dear sir/Madam,
    i bought 150 shares of AcroPetal Technologies Ltd through my broker at an average price of RS. 120 now as you know the share’s value is almost none.Sir what should i do now should i wait for some gain or sell the existing shares.
    Please reply as soon as possible.

  • Rajesh

    @ Vikas

    Quoted from Acropetal IPO Analysis from the Link: http://stockssavvy.com/?p=2569

    “Coming on to the valuations of the primary offering, at the upper band of 90, share is being issued at pre-money PE multiple of 4.74x, based on estimated FY11 EPS of Rs. 19, given Rs. 14.20 has been earned on per share basis in first nine months of fiscal 2011. This is not very attractive given that other smaller IT companies such as Nucleus Software and Omnitech are ruling at PE multiples of 3-4x, thus not leaving much on the table for the IPO investors. ”
    Savvy View:
    Vikas, We understand your concern of losing your capital by getting caught in a Operator trap. I still remember that while the IPO was out, we recommended the stock for risky traders as there was full chance of Operator Play in the stock because of the small issue size.
    Strategy going forward: We won’t advise to invest at this point in time in the stock. But even getting out at such cheap price will be foolishness. The capital erosion has been done now & Taking 1/5 of your money by selling the stock and investing in some other counter in hope that will cover your loss will be too risky & not advisable. EPS of 19 gives the counter a fair valuation of around 55 Rs. You need to keep a long term perspective & should hold the stock. Remember nothing else in the market but Patience. There will be a certain time when stock will again shoot in some bull run & you need to make sure you ride that bull run to make the most on your investment.

    Let me know if you want to discuss any further.:)

  • Jaypee304

    Vikas, Accumulate at CMP (Rs 11.25 ), it is doing exceedingly well. It has already earned Rs 22.00 Crores on consolidated basis in first two quarters of this FY. Even if you buy 1500 shares at CMP, your av. purchase price will come down to Rs 12.00 per share.

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