NBCC IPO: No great excitement, says SP Tulsian

SP Tulsian of sptulsian.com feels the issue is looking quite dull. According to him, there is no real great excitement for those who will be acquiring the shares of this company.

"I am unable to understand the reason for dilution of 10% stake, because if you see the eventual market cap of the company it will be at about Rs 1,100-1,200 crore. The issue size is about Rs 110-125 crore. What is the logic just for diluting 10% stake? The government could have gone for higher dilution of 25-40% but it seems that the mechanized figure of 10% has been kept for all the dilutions."

"If you see the trend of profitability, PAT margin which used to be at close to 14% for FY08 fell to 4.5% for FY11. It is the same kind of story - you are providing project management consultancy for civil infra, real estate development and considering that, the issue is issued at a price-to-book of 1.5 because the book value is at Rs 60."

"Even if I take a lower price band of Rs 90, it is issued at a price-to-book of 1.5. If you take the expected EPS of Rs 13-14 for FY11 and FY12, if I extrapolate the six months performance, it is issued at a PE multiple of 7-8. As against that there are many private sector companies providing similar kind of services and are available at a price-to-book of 0.6-0.9 and a PE multiple of 4-6. I don’t think that there will be much excitement for the issue."

"A 5% discount to the retail investor gives you a gain of about Rs 5, which can be treated as a listing gain. But if you take a view for next couple of months post listing, the share will languish maybe close to about Rs 100. There is no real great excitement for those who will be acquiring the shares of this company."