Subscribe to Engineers India FPO: Elara Capital

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Subscribe to Engineers India FPO: Elara Capital

Abhinav Bhandari, Elara Capital has recommended investors to ‘subscribe’ to the follow-on public offer (FPO) of Engineers India (EIL).

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS EIL eyes water, waste water management as high growth areas Apply for Engineers India follow-on offer: Nirmal Bang Engineers India FPO opens; should you subscribe? Engineers India's FPO opens for subscription Engineers India declines 8%

Abhinav Bhandari, Elara Capital has recommended investors to subscribe to the follow-on public offer (FPO) of Engineers India (EIL), reports CNBC-TV18.

The state-owned company has entered the capital market to 3.36 crore shares in the price-band of Rs 270-290 per share.

According to Bhandari, EIL will report revenue CAGR of 27-28%.

Here is the verbatim transcript of his comments. Also watch the video.

Q: Do you like EIL? What do you suggest investors?

A: Definitely we like it. It has a unique business model. It has strong fundamentals and positives are there in the market in terms of their strong balance sheet and phenomenal return ratios and cash of around Rs 1900 crore on the book.

However there are other concerns too like - the ventures where they are probably looking out for the city gas distribution, the power space, the fertiliser space. Perhaps these new ventures would be providing them growth premium of utilising their cash levels as of now. So it is looking good at this point of time.

Q: What about valuation and would you be comfortable bidding at the top end of the band at Rs 290?

A: Given the kind of order book of around Rs 6,200 crore, I don't think they should have a problem in growing at around 27-28% CAGR over the next two years. Perhaps there is one concern in the markets on margins. However we have to keep in mind that the Rs 6200 crore of order book what we are talking about is almost 50-50 in terms of both the CNE as well as the lumpsum turnkey projects.