ARSS Infrastructure to see Rs 500-mark: Udayan Mukherjee

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ARSS Infrastructure to see Rs 500-mark: Udayan Mukherjee

ARSS Infrastructure will list its equity shares today and it has fixed issue price at Rs 450.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » Nifty BSE | NSE 01/06/12 Are Mutual Funds betting on Nifty?

ARSS Infrastructure will list its equity shares today with a fixed issue price at Rs 450. ARSS Infrastructure reported Rs 600 crore of revenues in FY09. Managing Editor of CNBC-TV18, Udayan Mukherjee said, "Looking at ARSS Infra's order book of Rs 2,800 crore, which would be executed in 18-20 months-the company will report revenues by wide margin in FY10. Its FY11 revenues may be around Rs 1200-1500 crore. On that, it will report profits of around Rs 120-130 crore, which would be huge."

"On that profit, the market cap would be Rs 650-700 crore in two years from current Rs 450 crore. So the stock might see Rs 600 in near future, which is still available at single digit PE," he said. 

Mukherjee adds it will be mid sized construction company in two years of time. "The stock will see Rs 500-mark today."

Here is a verbatim transcript of Udayan Mukherjee's comments on CNBC-TV18. Also see the accompanying video.

One has to ask the question why the issue was subscribed 45 times plus with very good QIB appetite. The key takeaways when the management spoke to us last-they spoke about almost a Rs 2,800 crore order book and while they could not give guidance they said they would execute that entire order book in 18-20 months, which means you come up with figures like Rs 1,500 crore plus annually.

Last year they did Rs 600 crore in terms of revenues and this year they will beat by a wide margin and in FY11-it appears entirely possible that they go on to do between Rs 1,200-1,500 crore revenues and if they do that on their current margin profile, they will do that on Rs 120-130 crore of profits. These look very large in the context of what they did in fiscal year 2009 but I think that is the route that they are headed.

And on that Rs 120-130 crore profit if they do deliver it next year then the market cap at Rs 450 is just above Rs 650-700 crore that is a low middling single-digit PE multiple. So if you are discounting fiscal year 2011 earnings, I think the stock could be at Rs 600 quite easily.

The issue was Rs 450 so it could be Rs 600 quite easy and still be in single digit PE multiples. It has got a reasonable profile from railways and roads so in that sense a bit more de-risked than a pure road construction player with respectable margins.

Not to just get carries away because it's still a small company but I think it will become a midsized construction company over the next two years and they left a lot on the table if you go by fiscal year 2011 earnings. So should be a good listing. I won't be surprised if it's north of Rs 500 and eventually Rs 600.