2 New IPO’s in the flourishing markets

July 1, 2012   ·   0 Comments

IPO Analysis

With markets flourishing in the last 3 weeks, IPO market has come alive with 2 new IPO’s hitting the market this week. Hindustan Copper can also come with divestment plan in the next 3 weeks according to sources.

IPO AnalysisMax. Alerts Systems IPO Details

Max Alert Systems, a Mumbai based project company with focus in areas as diverse as mining, fire fighting systems and telecommunications, is entering capital market with a fixed price public issue of 40 lakh equity shares and aims to raise Rs 8 crore through the issue.

The IPO shall open on 28 June, 2012 and shall close on 2 July, 2012. This is a fixed price public issue at Rs 20 per share. Equity shares are proposed to be listed on BSE – SME platform.

Out of total issue size, 6 lakh shares are reserved for subscription by market makers and the net issue to the public stands at 34 lakh shares. Promoters’ holding will be reduced from 99.95% to 56.48% post issue.

The company will use the proceeds of the IPO for setting up of crushing plant (with an outlay of Rs 8.6 crore).

Comfort Securities Limited is the lead manager to the issue.

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VKS Projects IPO Details

VKS Projects, an engineering procurement and construction company, is entering the capital markets with an of Rs 55 crore. The company is engaged in the business of undertaking EPC contracts of CS/SS/alloy steel turnkey piping, civil land development, industrial / commercial infra projects, structural fabrication and erection of equipments, fire fighting projects and commissioning of chemical plants for various industries.

The IPO shall open on 29 June and shall close on 4 July, 2012. The price band has been fixed at Rs 55 to Rs 60.

The company intends to utilize proceeds of the IPO to enhance capital equipments base in order to increase on operational and financial efficiencies w.r.t project executions and also improve pre-qualification status. It also plans to expand operating activities by opening design studio/office and training centers at various locations across India.

Aryaman Financial Services Ltd is the book running lead manager to the issue.

CRISIL IPO grading: 1/5 indicating poor fundamentals. Crisil Ltd has assigned IPO grade 1 to the issue.

VKS Projects Financials

As of 31st December 2011, its debtors jumped to Rs. 66 crore, up from Rs. 16 crore as of 31st March 2011. PAT for 9m of FY12 stood at Rs. 5.6 crore, up from Rs. 3.2 crore in FY11, despite higher labour costs of Rs. 78 crore in 9m of FY12 versus Rs. 40 crore in FY11. Rs. 21 lakh related to IPO expenses have been charged off in P&L Account for 9m FY12, while it should have been adjusted against Securities Premium. Thus, company’s financials are very weak.

VKS Projects Valuations

As of 31st December 2011, company’s networth stood at only Rs. 18 crore, while it had 80 lakh shares outstanding, almost 100% owned by the promoters. In contrast, post-listing, company is seeking a market cap of Rs. 103 crore, at the upper price band of Rs. 60. EPS for 9m FY12 was Rs. 7, translating to a PE multiple of 6.4 times, based on annualized 9m FY12 EPS. Total debt as of date was also high at Rs. 21 crore, which will only increase further.

Company is in a desperate need of funds, as can also be judged from the timing of the issue, coinciding with SEBI’s 6 month deadline for presentation of financial statements in the RHP. Issue is fundamentally weak and a strong avoid.

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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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