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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Man Infraconstruction has opened its 56,25,150 equity shares initial public offering (IPO) for subscription. It plans to raise upto Rs 141.75 crore from this issue at the higher end of price band, which is at Rs 243-252 per share. The issue will close on February 22, 2010.

The issue has been receiving good response, overall subscribed nearly 7 times, as per data available on the NSE web site. Qualified and non-institutional investors supported the issue; their reserved portion subscribed 11.62 times and 9 times, respectively.

Experts and brokerages views were mixed on this IPO. Investment Advisor, SP Tulsian said the issue looked expensive while Manish Bhatt of Prabhudas Lilladher said one could subscribe.
 
Tulsian said, "Man Infra is basically a realty contracting company, and though it says it provides construction services for port infrastructure, residential, industrial, commercial and road infrastructure projects, its main bread winner is through building residential properties. As at 31st of Dec 2009, 83% of the outstanding order book of the firm of Rs. 3,020 crore was in residential projects, of which about 50% was for slum redevelopment and 10% for commercial and less than 5% was for ports."

"For FY10, based on the performance till 9MFY10, we can safely estimate that the company would have a topline of Rs 550 crore and PAT of Rs 100 crore, meaning we are looking at an EPS of Rs 22. This means, on the upper price band of Rs 252, it is at a PE of 11 times. Most of the existing companies are currently quoted at a PE of around 7 to 9 times. Man, the company really thinks it's the cat's whiskers! The entire effort of the company, post IPO would be wasted on sustaining these existing margins and not about growth. The IPO is way too expensive, both at the upper as well as the lower price band. When realty companies are wooing people with 'affordable housing', how can its contractors make handsome profits? Would investors be really interested in a company whose shares are being offered at an unaffordable price?"

Manish Bhatt of Prabhudas Lilladher said retail investors could subscribe to the issue at cut-off price. Thought the issue looks highly priced, one can get listing gains, he says.

Brokerage views

Keynote Capitals Research says, "Earnings estimates, computed on the basis of year-wise execution of order book, stand at Rs 15.97 and Rs 20.64 per share for FY10E and FY11E respectively, giving a p/e multiple of 15.8x and 12.2x for FY10E and FY11E respectively. In comparison, IVRCL Infrastructure trades at 10.1x FY10E and 10.8x FY11E, and Nagarjuna Construction at 20.8x FY10E and 20.9x FY11E. We believe MIL's valuation is attractive in view of the high EBITDA margins the company enjoys, which are higher than peers."