Avoid Gujarat Pipavav Port IPO: Way2Wealth

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Avoid Gujarat Pipavav Port IPO: Way2Wealth

Gujarat Pipavav Port (GPPL) has opened its Rs 500 crore initial public offering (IPO) for subscription.

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Gujarat Pipavav Port (GPPL) has opened its Rs 500 crore initial public offering (IPO) for subscription. Way2Wealth has recommended avoiding the issue, in its research report dated August 23.

GPPL is the developer and operator of APM Terminals Pipavav, which has multi-cargo and multi-user operations. It has the exclusive right to develop and operate APM Terminals Pipavav and related facilities until September 2028 pursuant to the Concession Agreement with GMB and the GoG. The price band for the issue, which closes on August 26, is at Rs 42-48/share.

The report says, "At the lower and upper end of the price band, the issue is quoting at P/BV of 4.3-4.9x its Dec FY09 Book Value of Rs 9.78. Its peer in this space is Mundra Port trading at P/BV of 9x and PE of 46x FY10 EPS of Rs. 17.5 per share. The traffic at ports in India is expected to increase to 954 million tons per year by 2012 & 1167 million tons by 2014. Traffic at the ports is expected to surge at a CAGR of 9.7% from 2008-2014 due to buoyant Indian economic growth. But we do believe that GPPL as compared to Mundra Port is comparatively smaller and it will take time for the company to deliver a positive PAT. One can definitely look for better avenues to park their money for better returns. Since not much peers are available we suggest going long on Mundra Port to enjoy higher comparative valuation. We give an avoid for the issue."

Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.               

To read the full report click on the attachment