ARSS Infrastructure IPO opens; should you subscribe?

The initial public offering (IPO) of Orissa based infrastructure company, ARSS Infrastructure Projects has opened for subscription.

The company plans to raise Rs 103 crore via this issue with a price band of Rs 410-450 per share. The issue will close for subscription on February 11, 2010.

While talking to Moneycontrol.com, experts as well as brokerage houses recommended investors to subscribe to the issue. Investment Advisor, SP Tulsian said issue seemed to be having scope of appreciation on listing and going ahead. Manish Bhatt of Prabhudas Lilladher said one should subscribe to ARSS Infra IPO.

Tulsian said, "ARSS should be able to post a topline of close to Rs 860 crore and PAT of Rs 70 crore which should result in an EPS of close to Rs 48 for FY10 on the expected expanded equity base of close to Rs 15 crore."

"The issue at the upper price band of Rs 450 is discounting FY10 earnings of the company by less than 10 times while at the lower band of Rs 410 it will be less than 9 times. Similar companies in the secondary market are ruling at a PE of over 12 times. So issue seems to be having scope of appreciation on listing and going ahead. It would be prudent and extra sweeter if book is discovered at lower end, giving better margin of safety to the prospective investors."

Bhatt said, "After looking at company's track recored, one should subscribe to this IPO. The company has reported CAGR of 120% in its PAT and 117% in revenues between FY07-09. It has posted topline of Rs 624 crore and EBITDA margin of 16% for FY09. For the period of nine-month of FY10, the earning per share came in at Rs 40 and book value of Rs 158; ROE stood at 29%, ROCE of 24.3% and EBITDA at 18.8%. Its order book is at Rs 2,877 crore, as of January 10, 2010, which is 4.61 times of FY09 revenues."

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