KNR Constructions, an infrastructure project development company, has opened for subscription with an initial public offering (IPO) of 7,874,570 equity shares of Rs 10 each for cash at a price to be decided through a 100% book-building process.

The issue will close for subscription on January 29, 2008. The price band has been fixed between Rs 170 and Rs 180 per equity share.

Moneycontrol conducted a poll on market experts to check whether to apply for the public issue or not. Majority of experts said don't apply.

Experts/Company	Poll Result	Experts view
R S Iyer (KR Choksey)	Don’t Apply	Better ignore KNR Constructions IPO. One can consider buying this stock on listing day.
Manish Bhatt (Prabhudas Lilladher)	Apply	KNR Constructions is a good issue and looks reasonably priced. One can apply for the issue.
SP Tulsian (Investment Advisor)	Don’t Apply	KNR Constructions is a pure contracting company, executing road and irrigation projects and most of the road projects were executed and are under execution with JV partner Patel Engineering Ltd. The unexecuted order book of the company, as at 30th November 2007, was at Rs 1,734 crore, of which about 89% is for road transportation engineering projects, with 68% of total orders having received from Central Government organizations and about 73% of the contract is from Southern region.   Presently, the company has about 2 BOT road projects on annuity basis, which are essentially assured return, low-risk model. Now let’s have a look at the valuations of the company. At the upper band of Rs 180, it will have a market capitalization of Rs 510 crore. Adding debt thereto, of Rs 190 crore, EV of the company works out to Rs 700 crore. This translates into order to market cap of about 2.5 times.   On expected EPS of Rs 10 for FY 08 share is valued at a PE of about 18 at the upper band. The construction equipments of over Rs 185 crore at the gross level, gives an added margin and advantage to the company. That could be one of the reasons why large projects are being procured by the company, as average size of each work is of about Rs 70 crore. Promoters’ stake of close to 72% of expanded equity base is also assured feature.   Improved capital base coupled with better net worth of the company, should enable it to go alone, for projects with better margins.   In view of recent fall in the secondary market, existing contracting companies have corrected sharply and are available at a PE multiple of anywhere between 12 to 15, based on FY 08 results. The valuation of this company at the upper band of Rs180, gives a multiple of about 18 times, which is quite expensive.   In this situation, it would be better to go for peers available in the secondary market, as the upper band of Rs 180 is quite expensive. Even lower band of Rs 170 per share results in a multiple of 17 times which is quite high. So now that you know, better to give a pass to this issue.

The issue comprises a net issue to public of 7,734,570 equity shares of Rs 10 each and a reservation for eligible employees of up to 140,000 equity shares of Rs 10 each for cash at a premium. The issue and the net issue will respectively constitute 28.00% and 27.50% of the fully diluted post-issue equity share capital of the company.

The equity shares are proposed to be listed on Bombay Stock Exchange and National Stock Exchange.

The proceeds from this issue are intended to be deployed for further equity investment in BOT projects and contribution towards the unsecured loan portion in the BOT Project (namely AP-07). The issue proceeds will also be used for purchase of capital equipment; and for meeting working capital requirement.

KNR Constructions provides engineering, procurement and construction (EPC) services across various fast growing sectors namely roads & highways, irrigation and urban water infrastructure management.

Presently, the Company is executing 3 irrigation projects of which one is with its joint venture partner Backbone Projects Limited [KNR-BPL (JV)] and two with its joint venture partner Sri Laxmi Engineering Co. [KNR-SLEC (JV)] with a contract value of its share including the value of work sub-contracted by KNR-BPL (JV) aggregating approximately Rs 1, 912.80 million. As on November 30, 2007, it has executed work aggregating approximately Rs 456.34 million and balance order book aggregating approximately Rs 1, 456.46 million is under execution.
 
The book running lead manager to the issue is Axis Bank Limited. The co-book running lead manager to the issue is Batlivala & Karani Securities India Private Limited.