Man Infra IPO subscribed; should you invest?

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Man Infra IPO subscribed; should you invest?

Man Infraconstruction has opened its 56,25,150 equity shares initial public offering (IPO) for subscription. Experts and brokerages views were mixed on this FPO.

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Reliance Securities says, "With the construction industry expected to grow at a healthy CAGR of 35% during FY09-13 and Infrastructure spending especially in roads, power, irrigation and urban infrastructure to increase substantially, MIL stands a clear chance to capitalize on with its strong and diverse order book portfolio along with strong clientele base with higher sustainable margins. Moreover, the ports sector is expected to grow threefold to Rs 325 billion over the next 5 years presenting significant growth opportunity for MIL which has a decent track record in port infrastructure construction (better margins than real estate)."

"At the higher price band of Rs 252, the stock quotes at P/BV of 3.8x post dilution and a PE of 14.1x its FY10E annualized EPS of Rs 17.9. Looking at the strong operational efficiency with high growth opportunity in the construction industry, along side its healthy cash flow generation with negligible debt augers well for the company, hence we believe MIL provides a good opportunity for investors and recommend subscribe at a higher band to the issue," according to Reliance Securities' report.

Swastika Investmart says, "Man Infraconsruction's IPO is aimed at funding its capital equipments purchasing requirements and general corporate purpose. The company enjoys expertise for various important construction activities viz. residential, commercial, industrial, port & road construction. Further, company enjoys good order book which is another strong feature. Considering the long-term infrastructure story in the country to continue and MAN's significant experience in this field we recommend applying for the issue with price target of Rs 400 in medium term. Listing gains of upto 20% can also be seen on stock as IPO seems to be prudently priced."

Angel Securities says, "MInfra's main client, DB Realty, has also been successful in raising funds to the tune of Rs 1,500 crore via an IPO, which augurs well for MInfra. We have accordingly factored in MInfra's Order inflow in our model. On the Operating front however, as mentioned earlier, we have factored in sharp dip in Margins. As a result, we estimate the company to report subdued Bottom-line CAGR of a mere 8% over FY2009-12E."

"On the valuation front, the IPO is available at a P/E of 11-12x FY2012E Earnings on the lower and upper price bands respectively, which is at a premium to listed players. Moreover, due to the concentrated nature of business and subdued Earnings growth, we believe the stock should trade at a discount to its peers. Hence, we recommend an avoid to the issue," according to Angel Securities report.