Blue Bird (India), a leading manufacturer of paper-based notebook and stationery products with the highest market share of 48% amongst large, organised players in India, is open for subscription with a public issue of 87,75,000 equity shares of Rs 10 each for cash at a premium to be decided through the 100% book-building process.

Its a good company with good track record. The money raised will be used to expand capacities, increase presence in publication, open offices in various cities and reduce debt. Experts believe, investors should subscribe to this issue with long gestation period.

Experts like RS Iyer of KR Choksey, SP Tulsian, Investment Advisor and Manish Bhatt of Prabhudas Lilladher give their views on both issues:

RS Iyer of KR Choksey Securities

Blue Bird is a good company. Since 30 years, the company is in production of notebooks. It shows that they are loyal and dedicated to the industry and their own products. They have developed good brand name in the market. As compared to Navneet Publications, the company's margins are less because Navneet is more into publication while Blue Bird is into notebooks. hence, their publication part forms less part in their revenues.

But this public issue will help the company as it will help open branches in various cities and also enter heavily into publication business. Overall, the company wants to increase the revenue nearly Rs 500 crore in FY07. Their plants are neat and well automated with advanced technology. It shows real entrepreneurship.

Therefore its public issue looks very attractive. The price band is very cheap. It is an excellent issue. Investors should apply for this issue for short as well as long term.

On listing, retail investors normally sell shares, but they can hold this company for long term. FIIs will definitely buy company's shares in bulk for long term and it will definitely list over Rs 130.

Investment Advisor, SP Tulsian

Blue Bird is a good issue. Investors should apply for this issue. It has good presence in the market with their good brand name. They are ramping up their brand name in the market. This money will definitely help the company for their new capacities. They want to grab major market share and enter heavily into publication.

Manish Bhatt of Prabhudas Lilladher

Blue Bird is an average issue. Investors can subscribe to this issue for listing gains as well as for long term i.e. more than one-year. They are increasing their exports. They are targeting more foreign universities. The company is mainly into print media. They have planned to expand their business more in Hyderabad, Bangalore and other states in south. Investors have to wait for long gestation period. The company can definitely achieve Rs 500 crore revenues in FY07. Therefore overall, the issue looks to be good.

Comments from Broking firms:

Keynote Capitals

Blue Bird is a leading player in the domestic notebook and stationary market with a track record of around 30 years. The size of the notebooks and stationery market is estimated at Rs 8000 crore (AC Nielsen ORG MARG report). Of this fragmented market, around 80% is held by the unorganised sector. Also large players account for 15% of the 20% share of the organised sector.

Success of the company’s business model will hinge on its ability to improve its brand equity, in the absence of which, scope for margin improvement would be limited. We believe given the valuation of 11.2x FY07E and 8.7x FY08E, investors may consider this IPO with a medium term view.

India Infoline 
 
In the printing and stationery industry, Navneet Publications and Sundaram Multi Pap Ltd are the closest competitors of Blue Bird, BBIL. However, we cannot strictly compare BBIL with Navneet, which is more of a content and publication company than just a notebook and stationery products manufacturer. The issue has been priced in the range of Rs 90-105. We recommend investors to wait for some correction post listing and then take position in the company.

Use of net proceeds from the Issue

(Sources: India Infoline)

As of September 30, 2006, Rs 89.2mn has already been incurred.

The price band for the issue has been fixed at Rs 90 to Rs 105. The issue closes on November 22, 2006.

Comparison with Peers

The company is raising capital through this public issue to finance the construction of its second major notebook manufacturing and printing unit in South India; to expand capacity at its existing plant in Pune and purchase the registered and corporate office premises presently on leave and licence; to expand its network of sales and distribution offices throughout India; to augment its long-term working capital requirements; and to repay some existing long-term debts.
 
In addition to notebooks, the company also manufactures products like files, perforated pads, registers and filler papers as part of its stationery business. Moreover, the company publishes study aids/educational materials and children’s books with in-house developed content and is also engaged in commercial printing of third-party content including textbooks, magazines, catalogues, calendars and annual reports.
 
During fiscal 2005, Blue Bird began export of notebooks and printed materials to Kenya, Ghana and South Africa. The company plans to expand both its market presence within India and in sub-Saharan Africa, with increased marketing efforts and penetration in the export market.
 
Blue Bird had total income of Rs 401.70 crore and net profit of Rs 25.12 crore in fiscal 2006. The company has posted improved performance during the first-half of the current year. For the period ending September 30, 2006, the company reported a total income of Rs 237.55 crore, 18.34% higher compared to the previous year’s first-half total income of Rs 200.75 crore. During the same period, net profit for the first half of fiscal 2007 at Rs 15.10 crore was 19.65% higher compared to the previous year’s first-half net profit of Rs 12.62 crore.

The book running lead manager to the issue are DSP Merrill Lynch and Karvy Investor Services. Intime Spectrum Registry is the registrar.

By Sunil S Matkar