SCI FPO opens; should you subscribe?

19 Investors following SCI FPO. Share this News with them.

0

Like this story, share it with millions of investors on M3

SCI FPO opens; should you subscribe?

Follow-on public offer (FPO) of Shipping Corporation of India (SCI), one of India's largest shipping companies in terms of Indian flagged tonnage, opened for subscription.

Post your opinion here

 

0

Tweet

Share on Tumblr

BSE | NSE 01/01/70 Are Mutual Funds betting on ? Other Stocks in this news Shipping Corporation of India |

The follow-on public offer (FPO) of Shipping Corporation of India (SCI), one of India's largest shipping companies in terms of Indian flagged tonnage, opened for subscription. It has been subscribed nearly 40% so far, as per the NSE.

The company aims to raise around Rs 1143.33-1185.7 crore at price band at Rs 135-140 a share. It offers 8,46,90,730 equity shares through FPO.

Investment Advisor, SP Tulsian said retail investors would make an assured gain, given the 5% discount. "However, QIBs and HNIs may not make a killing, as seen in Coal India (and expected in MOIL). Moreover, since overall sentiment is cautious, it has made secondary market valuations more attractive, and HNI investors may not participate with full support. Retail investors may apply at the upper band, and expect to get shares at Rs. 133 a piece, while others can give this one a miss and look at options in the secondary market!" he said.

Prabhudas Lilladher, KR Choksey, Anagram Research and Hem Securities recommended subscribing the issue while Angel Broking is neutral on issue. "At the upper and lower band of the FPO, the stock is available at a 2.9% and 6.3% discount to its CMP, respectively. At the upper band, the offer is priced at a P/B of 0.9, whereas, we estimate the NAV of its current fleet to be close to its BV. On a PER basis, the stock trades at 7.5x annualized earnings. With valuations being reasonable as well as the stock trading close to it 52w low, coupled with a discount being available to the CMP, we recommend subscribe to the issue," Prabhudas Lilladher said.

KR Choksey recommended subscribing to the issue on the back of the following factors 1) It is the largest shipping company in India with strong brand name, highest capacities and diversified business model; 2) It is a cash rich company with a strong balance sheet position; 3) SCI's consistent profitability and dividend paying record highlights the management's business acumen; 4) The robust GDP to fuel the shipping sector's growth; and 5) Capacity expansion coupled with increased demand and stable freight rates to auger well for SCI.

"Current replacement value per share of SCI post capex completion in FY12 works out to Rs 165 per share. SCI is India's largest shipping company and has liner services to all trading partner across the Globe and hence can carry anything ranging from liquids, dry and liquefied gases form of cargo which gives it along head start advantage. Hence from a medium to long term horizon SCI offers a good investment opportunity, "according to Anagram.

Angel Broking believes GESCO is a better bet than SCI at current levels, given the former's higher return ratios, earnings growth, relatively younger fleet and exposure to the high-growth offshore segment. "Our fair value for SCI works out to be Rs 143/share (0.8x one-year forward P/BV). Hence, we recommend Neutral on the issue," report said.

SCI has approximately 35% share of Indian flagged tonnage as of June 30, 2010, according to the website of Directorate General of Shipping, Government of India (DG Shipping). As of September 30, 2010, it owned a fleet of 74 vessels of 5.11 million dead weight tonnage (DWT).

Its fleet includes dry bulk carriers, very large crude carrier (VLCC) tankers, crude oil tankers, product tankers, container vessels, passenger-cum-cargo vessels, phosphoric acid and chemical carriers, LPG and ammonia carriers, and offshore supply vessels.

The company will not receive any proceeds from the offer for sale by the government. However, net proceeds from the fresh issue will be used for part funding the equity portion for the acquisition of certain vessels by company and general corporate purposes.