What experts think of the new IPOs?

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What experts think of the new IPOs?

The IPO market seems to be opening up now. With the secondary market having bounced back to 11,600, issues are happening again. And three of them: Voltamp Transformers, KEW Industries and Deep Industries will open in the next few days. Kashyap Pujara and VK Sharma look at these issues.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » Nifty BSE | NSE 31/05/12 Are Mutual Funds betting on Nifty? Other Stocks in this news Alstom T&D India | Oil and Natural Gas Corporation | Punjab Tractors | Shiv Vani Oil & Gas Exploration Services | Tata Motors | Emco | Denso India | Hindustan Oil Exploration Company | Kalpataru Power Transmission | Amtek India | Indo Tech Transformers | GMR Infrastructure |

The IPO market seems to be opening up now. With the secondary market having bounced back to 11,600, issues are happening again. And three of them: Voltamp Transformers, KEW Industries and Deep Industries will open in the next few days.

Kashyap Pujara of Sushil Finance asks to subscribe to Voltamp Transformers issue. He says that the company has good capability and a strong order book and will be a good performer in this industry.

Whereas VK Sharma of Anagram Securities asks to stay away from KEW Industries and Deep Industries.

Excerpts from CNBC - TV18's exclusive interview with Kashyap Pujara and VK Sharma:

Q: What do you think of the Voltamp Transformers issue?

Pujara: Overall, if one looks at the industry in which it is, it offers immense potential. The way transmission and distribution of the power industry is gaining traction, even if one is looking at the government's ongoing programme for power by 2012, there is a good tailwind in the sector.

Apart from that, Voltamp has good capability. They have a very strong order book. They are manufacturing all types of transformers and supplying it to reputed business houses. They also have two license agreements with German companies. So overall, they are positioned very well. There is good growth visibility for the next four-five years.

Even if one is looking at valuations with the issue coming out. At the upper end of the band, we are looking at a valuation of 15 times. At the lower end, we are looking at somewhere around 13 times. So it is still at a discount to what its peers are trading at, like say Indo Tech Transformers or probably Emco .

This, according to me, is offering a good amount of cream to the investors, in the sense that we are seeing the issue coming out at a discount to what the peers are trading at. So this could basically generate some return for the investors.

Q: What sort of an EPS target do you have for Voltamp?

Pujara:  We have not kept any targets. But overall, looking at the way the sector is going, we are positive on most of the companies in the transmission and distribution, T&D, space, be it Areva T&D or Kalpataru Power Transmission .

So we are looking at a very positive traction in this entire industry, even Voltamp will be a good performer in this industry.

Q: KEW Industries is another IPO. What is it that you like about the business, and would you subscribe to it?

Sharma: As the capital markets start doing well, we are going to see all those issues that were being postponed for a long time, coming back into the capital market. Probably this is one of those issues, which went to Sebi around November 2005 and is seeing the light of the day now.

The company is into the auto ancillary business, 70% of which goes to giants like Tata Motors and Punjab Tractors and 30% is accounted for by Defence, where it makes bombshells, and also a certain extent for the railways. But what needs to be looked at is that this is the company, which is going to raise equity. The promoter's equity is going to fall to an extent of around 25%. That is not encouraging.

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