Avoid M and B Switchgears IPO, says MLR Securities

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Avoid M and B Switchgears IPO, says MLR Securities

Transformers manufacturer M and B Switchgears' initial public offering of 50 lakh shares will be closed for subscription on October 5. MLR Securities advised investors to avoid the issue, in its research report dated September 30.

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Transformers manufacturer M and B Switchgears ' initial public offering of 50 lakh shares will be closed for subscription on October 5. MLR Securities advised investors to avoid the issue, in its research report dated September 30.

M and B Switchgears (MBSL) is into manufacturing of distribution transformers, power transformers, furnace transformers and special purpose transformers. The company began with a capacity to manufacture 550 transformers per annum and has gradually increased its capacity to 5,109 transformers per annum. Existing annual production capacity is 9,00,000 KVA per annum on single shift basis.

The company is also planning to diversify its operations into solar power segment and is in the process of setting up a 2MWp grid connected PV solar power project in Madhya Pradesh which is expected to commence operations in November 2011. Further, the company is planning to set up an additional 4MWp grid connected PV solar power project in Rajgharh, MP for which the company will be utilizing IPO proceeds.

The report says, "Company is asking for an exorbitant valuation of 350-362 times FY11 EPS and a market cap to sales ratio of 10. Established players like Transformers and Rectifiers, Voltamp Transformers are trading at a P/E and MCap to sales ratio of less than 10 and 1, respectively. We recommend investors to avoid this issue."

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To read the full report click on the attachment