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Sep 12, 2011, 08.06 AM IST
PG Electroplast, an electronic manufacturing services provider, will close its 57.45 lakh shares public issue for subscription on Monday, September 12. Price band for the issue is at Rs 190-210 a share.
Experts, as well as brokerage firms, feel that the issue looks overvalued. Majority of them advise investors to avoid investing in PG Electroplast IPO.
IPO analyst Arun Kejriwal said investor should be cautious while applying for IPO. "Due to market uncertainty investors should wait till the issue get listed on the bourses and then at whatever levels the share price stabilise one can invest in the stock. It is a good company with a growth prospect,” he said.
According to investment advisor, SP Tulsian, PG Electoplast does not deserve even Rs 50 as a fair value.
“It seems that the stock does not deserve a value of more than Rs 50 while the price band is close to about Rs 200. If you go by their product profile they are making electronic components for Colour TV, CC TV etc. The financial performance has been very pathetic because they are ultimately the supplier to the end product maker and net profit margin which used to be less than 1% in FY09 has increased to 4% in FY11," Tulsian said.
He further added, “The agencies those who are connected with issue whether you take the call on book running lead manager (Almondz) or the marketing agency (concept) or the distributors or the promoters all indicate the concerns on the issue. Earlier these kind of issues used to be in the range of Rs 40 to 60 crore but this issue size is at Rs 100 to Rs 110 crore."
“Honestly I do not see, maybe the top-line of Rs 400 crore, PAT of Rs 17 crore for FY11 translates in to a PE multiple of close to about Rs 13. But if you see the fate of the companies which have been ruling in this space- if I compare this with Zicom or with Videocon Industries they are not ruling at these kinds of PE multiple. They are all ruling at a PE multiple of Rs 5-6. Sometimes you admire the courage of the issuer, book running lead manager to aggressively priced all these IPOs. I am not convinced at all," Tulsian said.
PG Electroplast aims to raise Rs 109.16-120.65 crore through the issue. It intends to use that money for prepayment of the portion of term loan and line of credit facility proposed to be availed by company for the expansion under Phase I; expansion of manufacturing facility at Unit III, Greater Noida; expansion of manufacturing facility at Unit IV, Pune; and for long term working capital requirements.
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