IL&FS Trans IPO overbid; should you invest?

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IL&FS Trans IPO overbid; should you invest?

The initial public offering (IPO) of IL&FS Transportation Networks (ITNL) has received good response from investors. It has been subscribed 1.86 times so far, as per data available on the NSE website.

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The initial public offering (IPO) of IL&FS Transportation Networks (ITNL) has received good response from investors. It has been subscribed 1.86 times so far, as per data available on the NSE website.

Qualified institutional investors looked quite supportive, as their reserved portion got oversubscribed 3.53 times. However, the response from retail and non-institutional investors remained poor.

The issue, which will close on March 15, has already received a committment of Rs 126 crore from anchor investors (AIs). The price band is at Rs 242-258 per share.

Not only experts, but brokerages also advised investors to subscribe to this issue. Investment Advisor, SP Tulsian strongly advised to apply in the issue even at the upper price band of Rs 258 for listing gain as well as investment gains. Manish Bhatt of Prabhudas Lilladher also said one could subscribe to IL&FS Transportation's IPO with medium to long term perspective.

Tulsian said, "The company posted a total income of Rs 980 crore with PAT at Rs 123 crore for the period of six months ended on September 2009. This translates into an EPS of Rs 7.17 for the half year."

"IRB Infra a sizeable and comparable company, listed on exchanges, which is now ruling at Rs 255 with market capitalization of about Rs 8,500 crore with EV of about Rs 11,000 crore. If we expect an EPS of Rs 11 for FY10, share is now ruling at a PE of about 23 times. IL&FS is capable to post an EPS of Rs 16 for FY10, which translates into a PE of about 16 times, at the upper band of Rs 258 per share. Promoters of the company are a leader in infrastructure field, for the last over 2 decades, due to which, they enjoy better valuations and discounting."

Brokerages Views

Angel Broking says, "ITNL's IPO, we believe is reasonably priced considering the emerging growth opportunities, its strong portfolio of assets and sound parentage. Further, on comparative valuations, ITNL (based on the limited information provided in the RHP) scores over IRB Infra. Hence, owing to relative attractive valuations, we recommend a subscribe view on the IPO."