Expert advice: Should you subscribe to Jindal Cotex IPO?

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Expert advice: Should you subscribe to Jindal Cotex IPO?

Jindal Cotex has opened for subscription with an initial public offering (IPO) of 1,24,53,894 equity shares. Moneycontrol.com conducted a poll whether one should subscribe to the issue or not. Experts were not happy with the issue pricing.

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Jindal Cotex has opened for subscription with an initial public offering (IPO) of 1,24,53,894 equity shares of face value of Rs 10 each for cash at a price of Rs 70-75 per equity share aggregating Rs 87.18-93.40 crore. The issue will close on September 1, 2009.

Moneycontrol.com conducted a poll to find out if you should subscribe to the issue or not. Experts felt the issue was overpriced and advised not to subscribe.

Investment Advisor, SP Tulsian said one should remain away from the issue. "One must admire the courage of the promoters to come out with an IPO in the band of Rs 70 to Rs 75, against the book value per share of Rs 23.10, as on 30-06-09 and at a PE multiple of 21.68 times, at the upper end of the price band. There are over 10 similar companies available at PBV of 0.50 times and at a PE of close to 5 times", he said. 

"Such companies come out with IPO mainly to play in the stock market, as it is obvious that no sane investor would be willing to subscribe to it, when so many lucrative ideas are available in the secondary market. A clear advice to the public - remain away from the issue and don't be part of this weak and unviable project", Tulsian added.

"Present condition of the primary market is not favourable to investors. One should not apply to a single issue right now. One should avoid Jindal Cotex as well, as there is no counter demand for the issue", RS Iyer of KR Choksey Securities said.

Avinash Gorakshakar, Head-Research at Reliance Money said, "We have not recommended the issue because there are many more attractive IPOs' in the pipeline." The price band should have been at Rs 30-50 a share, he added.

Manish Bhatt of Prabhudas Lilladher said one could apply to the issue for listing gains of around 10-15%.

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