M and B Switchgears IPO: Analysis by V S Fernando

By V S Fernando, IPO Analyst at India Aarthik Research

A company whose aggregate profit in last five years was only Rs 2.6 crore and reserves is just Rs 1.1 crore is asking for a share premium of Rs 45 crore!  How can one justify a market cap of Rs 360 crore plus for a company whose aggregate turnover in last five years was only Rs 135 crore? Absurd valuation short-circuits genuine appreciation prospects on M&B Switchgears.

OFFER AT A GLANCE
Name	M and B Switchgears Ltd
Offer Quantity	50 lakh shares of Rs 10 each
% on Total Equity	25.0%
Offer Price	Rs 180 to Rs 186
Offer Amount	Rs 90 cr to Rs 93 cr
Application Quantity	30 & Multiples of 30
Offer Opens	September 28, 2011
Bid/Offer Closes	October 5, 2011
Rated By	ICRA
Rating	2 out of 5
Lead Managers	D & A Financial
Registrars	Bigshare Services

The IPO

The present IPO is a fresh issue of 50 lakh equity shares of Rs.10 each constituting 25% of the company