CONG - DMK DRAMA ENDS, MARKET TO OPEN IN THE POSITIVE

• SEBI notice to RIL on NCD  conversion - may not affect stock price.
• Hero group to buy Honda stake at Rs 3833cr, stock may react positively today.
• Jubiliant Life Sciences to set up unit in Gujurat.
• Infy to name successor by July end.
• Buy Maruti Suzuki at CMP.

• RBI sets up working group to study the working of NBFCs.
• Libya crisis - Brent cude crosses $118 a barrel.
• DMK softens stand, may agree to Congress demand, market likely to open in the positive.
• TCS to focus more on cloud computing.
• United Phosphorus bus 50% stake in SIB of Brazil.
• SEBI imposes penalty on Coal India IPO lead managers, for depriving 12,000 investors due to technical hitch.
• Scam tainted Balwa out of DB Realty. Resigns as CMD and also as director.
• Accumalate Coal India at CMP.
• Lovable Lingerie IPO opens totady. Price band Rs 195-205.
• L& T Finance IPO deferred till June / July 2011.
• Karnataka Banks' rights issue opens today.

NIFTY MAY FACE RESISTANCE AT 5700 LEVEL.

• RBI's Monetary policy review ( mid quarterly) in third week of March 2011.

• China and Russia are above India in corruption graph - FITCH.
• Parsvanth Developres wins the bid for 38 acres land project in New Delhi.
• Free charity dinner with Buffett for IRDA chief.
• Wealth management business - RBI and SEBI may get more teeth.
• Diesel decontrol unlikely till June end.
• Buy Reliance Industries at CMP - Rs 985. Three months target Rs 1150.

MARKET WATCH

• Ashish Dhawan quits PE firm Chrys Capital.
• Raising oil prices a concern for Asian economies - Pranab Mukherji.
• DMK directs its ministers to quit, Govt - safe for now.
• Stock splits, bonus from NALCO. Stock split from Rs 10 into two shares of Rs 5 each. Bonus in the ratio of 1:1.
• By 2020, Infy may have to hire a million - BNP report.

• Indian Bank to add 100 braches in FY 12, May come out with FPO.

MARKET WATCH

• IDBI Capital has been mandated to sell 5% of NSE stake. The Exchange is valued around Rs 20,000cr.
• Hind Copper FPO deffered again. The FPO will happen in the second quarter of FY 12.
• Fortis Global acquires 28.6% in Colombo hospital. Fortis has paid $ 36.3 million for the 350 bed hospital.
• Lanco Infra buys Australian coal forms for Rs 3400cr. These firms have an esitmated reserve of 1.2b tonnes.
• Canara Bank raises $ 350 m  under medium term note to fund credit growth in overseas business.
• RBS : Oil prices unlikely to dip in the short term. At $120 a barrel, may affect GDP of Asian countries by 2%.
• Bank of India to buy 51% in Bharati AXA Mutual Fund.
• Shriram to dilute 15% stake to TPG. TPG will be investing around Rs 1800cr in Shriram Capital Limited.

IPO ANALYSIS: LOVABLE LINGERIE LIMITED – BLOATED EQUITY, AGGRESSIVELY PRICED – AVOID.

The Mumbai based innerwear manufacturer is entering the capital markets shortly with issue of 45, 50,000 equity shares of Rs 10 each in the price band of Rs 195-205. The company recently raised Rs 20cr (Pre IPO placement) by allotting 10 lakh equity shares @Rs 200 to SCI Growth Investments, including share premium of Rs 190. Anand Rathi is the BRLM. The issue opens on 08-03-11 and closes on 11-03-11.

BUSINESS:

The company, incorporated in the year 1987, is one of the country’s leading women’s innerwear manufacturers.  The products include brassieres, panties, slips / camisoles, home wear, shape wear, foundation garments and sleepwear products. The Company was licensed the brand Lovable from Lovable World Trading Company, USA. Subsequently, by an agreement, the Company acquired the brand “Lovable” from Lovable World Trading Company, USA, on an exclusive basis for the territories of India, Nepal, Sikkim and Bhutan. The innerwear products manufactured under the brand Lovable cater to the premium segment market in the country.

Lovable and Daisy Dee are the flagship brands.  Lovable is amongst the top preferred brand in women’s innerwear in the country. As part of the growth strategy, the company has diversified the portfolio of brands and acquired brands like “Daisy Dee” from Maxwell Industries Limited, and College Style from Levitus Trading Limited, Hong Kong. 

The company has three manufacturing facilities of which two are situated in Bengaluru and one is situated in Roorkee, Uttarakhand. The company has a total installed capacity of 30 lac pieces each per annum to manufacture brassiere and panties.

Going forward, the company proposes to implement a project for modernization and integration at a new location in Doddakalasandra, Bengaluru, which will result in increase in capacity and value-addition by 25 lacs pieces per annum. The manufacturing unit situated at Roorkee, Uttarakhand commenced operation in February, 2010 and has an installed capacity of 7.5 lac pieces per annum to manufacture brassiere and panties. 

OBJECT OF THE ISSUE

 The objects of the Issue are:

1.  Setting up of a manufacturing facility to create additional capacity at Bengaluru

2.  Expenses to be incurred for Brand Building;

3.  Brand Development expenses for “College Style” 

4.  Investment in Joint Venture;

5.  Setting up of Exclusive Brand Outlets

6.  Setting up of retail store modules for “shop-in-shop”

7.  Up gradation of design studios

8.  General corporate purpose

FINANCIALS:

RS IN CRORES

	08	09	10
TOTAL INCOME	63.08	68.81	86.79
PAT	4.16	2.87	10.55
EPS (RS)	6.31	3.82	14.07##

## On an equity of Rs 7.50cr, the post issue equity will be Rs 16.80cr.

MAATERS OF CONCERN:

a. The company has capitalized its reserve by issuing bonus shares (97,50,000) to the promoters in the year 2010. This, along with the present issue will raise the equity base to Rs 16.80cr.

b. Labour intensive industry and hence may face labour disruptions, which may affect the production.

c. For setting up of additional manufacturing facilities at Bangalore, the appraisal was done by BOB in 2009, for which a Term loan of Rs 16.33cr has been sanctioned by BOB. However, for the purpose of IPO, the company again has included the entire amount as cost of the project. One wonders what happened to the Term Loan availed, for the same purpose.

d. The land on which the proposed expansion is to be carried out is a disputed one. The expansion is likely to be delayed.

e. The Company is dependent on third party transportation providers for the supply of raw materials and delivery of the products and any disruption in their operations or a decrease in the quality of their services could affect the Company's reputation.

f. IPO grade 3 by CARE.

VALUATION AND RECOMMENDATIONS:

At Rs 195-205, the issue is very expensive, considering the bloated equity before the IPO. Assuming that the company will report a PAT of Rs 12cr for FY 11 (up 20% over previous year), the EPS on the post issue equity of Rs 16.80cr will be around Rs 7/- and the PE will be around 30 which makes the IPO expensive.  Most of the IPO funds will be spent on brand building, JV and Exclusive out lets, which may not add up to higher margins. Compared to the previous years, the margin in the year 2010, (IPO in mind) has improved substantially which is to be taken with a pinch of salt.  AVOID SUBSCRIPTION.