WORST PERFORMING IPOS OF 2010

            

             

Name of the company	Issue price	Price as on 30-06-10	Down by %	BRLMs
Emmbi Polyarns	RS 45	RS 18.40	59.11	Keynote corporate
Shree Ganesh Jewellery	RS 260	RS 113.55	56.33	Axis bank, ICICI securities, Avendus capital
Texmo Pipes & Prod.	RS 90	RS 44.50	50.56	Almond Global,IDFC-SSKI
Tarapur Transformers	RS 75	RS 38.80	48.27	COMFORT SECT.
GOENKA DIAMONDS	RS 153	RS 74.80	44.59	SBI CAPS
Syncom Healthcare	RS 75	RS 45	39.73	Charted capital
Nitesh Estates	RS 54	RS 38.55	28.61	ICICI, ENAM, KOTAK
Hathway Cable & Data	RS 240	RS 183.25	23’65	MORGAN ENAM,KOTAK
DB Realty	RS 468	RS 377.30	19.38	ENAM, KOTAK
INFRA SOFT	RS 145	RS 118.10	18.55	COLLINS STEWART INGA, ANAND RATHI

IPO ANALYSIS: PARABOLIC DRUGS LIMITED – OVER PRICED - AVOID.

The Chandigarh based bulk drugs manufacturer is entering the capital market with an IPO. The company intends to mobilize Rs 200cr from the public offerings.
The company is proposes to issue 23.50 million equity shares in the price band of Rs 75-85, including offer for sale of 2.02million shares of Rs 10/-FV.
The issue will open on 14-06-10 and close on 17-06-09.

Pranav Gupta, Vineet Gupta, PNG Trading Private Limited and Parabolic Infrastructure Private Limited promote the company.

AVENDUS CAPITAL PRIVATE LIMITED and ICICI SECURITIES LIMITED are the BRLMs.

The above BRLMs recently managed Shree Ganesh Jewellery IPO along with another merchant banker. As against the issue price of Rs 265/- the share is currently quoting around Rs130/-

BUSINESS

The company is engaged in the manufacturing, including contract manufacturing of
Active Pharmaceutical Ingredients (API) and API intermediates for the domestic market as well as for exports. APIs, also known as bulk drugs‘ or bulk actives‘ are the principal ingredient used in making finished dosages in the form of capsules, tablets, liquid, or other forms of dosage, with the addition of other APIs or inactive ingredients. The company also produces the Semi Synthetic Penicillin
(SSP) and Cephalosporin range of antibiotics in oral and sterile form, along with their intermediates.

Parabolic Drugs own and operate two manufacturing facilities at Derabassi, Punjab, and in Panchkula, Haryana. The commenced commercial operations in February 1998 by setting up a unit at Sundhran, Derabassi, to manufacture SSPs. It has six units at Sundhran, Derabassi, for manufacturing the oral and sterile range of Cephalosporin APIs and intermediates. The facility at Sundhran, Derabassi, is WHO-GMP and ISO-14001 certified. The second facility at Panchkula was established in fiscal 2005. Currently, the Panchkula facility has two units manufacturing SSPs and API intermediates such as 6 Amino Penicillin Acid. The company is in the in the process of setting up a custom synthesis and research and development centre at Barwala, Haryana, for development and scale-up of new APIs and APIs intermediates in all therapeutic segments, including non-antibiotic products. This facility is expected to commence operations in the last quarter of fiscal 2010, to focus on providing contract research services to innovator companies. In addition, the company is in the process of setting up another manufacturing facility at Chachrauli, Derabassi, to manufacture the non-antibiotic range of APIs, which is expected to commence commercial operations in the third quarter of fiscal 2011.

OBJECTS OF THE ISSUE

The company intends to utilize the funds for the following purposes:

1. Multi-purpose block III at Derabassi;
2. Sterile cephalosporin plant at Derabassi;
3. Establishment of manufacturing at Chachrauli.
4. Custom synthesis and manufacturing site II at IT Park, Panchkula;
5. Repayment / prepayment of identified loan facilities.

FINANCIALS:

The total revenue earned has increased from Rs. 15,056.33 lacs in fiscal 2007 to Rs. 39,693.70 lacs in fiscal 2009, and profit after tax has increased from Rs. 1,358.98 lacs to Rs. 2,109.20 lacs during this period. The total income and profit after tax as at September 30, 2009 were Rs. 23,342.56 lacs and Rs. 1,241.23 lacs, respectively. The net sales have increased at a CAGR of 62.50% from fiscal 2007 to fiscal 2009. Direct exports constituted 27.65% of our net sales in fiscal 2009, and 32.25% as at September 30, 2009.

MATTERS OF CONCERN.

• The company operates in a competitive business environment, both globally and domestically. Competition from existing players and new entrants and consequent pricing pressures will adversely affect the business..

• The pharmaceutical industry is highly regulated and the success of the company’s strategy of entering regulated markets is dependent on a number of factors beyond control the control of the company.

• Highly indebted company with floating rate of interest. As at September 30, 2009, the secured loan funds aggregated Rs. 30,385.83 lacs, all of which were at floating rates of interest which exposes the company to interest risk.

• Significantly dependent on imports of raw materials, particularly from China, and are to that extent exposed to risks including duties placed on imports from other countries.

• The name, business and logo of ‘Parabolic’ are not registered trademarks in the name of the Company.

• The funds requirement and funding plans are as per the company’s own estimates, and have not been appraised by any bank / financial institution.

• The average cost of acquisition of shares by promoters are as follows:

No. of shares Rs

Mr. Pranav Gupta 8, 24,100 3.50
Mr. Vineet Gupta 7, 01,550 3.42
Parabolic Infrastructure 58, 06,620 3.33

PNG Trading pvt ltd 1, 35, 70,800 3.43


IPO Grade – 2 by CARE

The grading is constrained by company’s unfavorable capital structure, project stabilization risk, volatility in prices of imported raw material along-with exposure to exchange risk because of imports and liabilities denominated in foreign currency, though partially mitigated because of direct exports. The grading factors in the strong growth in revenue reported in past, experienced management, approvals and certificates of suitability for few products from regulatory authorities in USA, EU and other regulated markets, reputed client base, strong focus on R&D activities and the company’s strategy to diversify into CRAMS business.


VALUATION AND RECOMMENDATIONS

For the FY 10 the company reported a net profit of Rs 21.10cr. The EPS on the post bonus and post issue equity works out to Rs 3.70. At the upper price band of Rs 85 the company demands valuation in excess of 20 PE. Companies like Neuland Lab and Nector life, who are in the similar line of business, are available at less than 9 PE. Grossly over priced. AVOID.

IPO FROM AN INTANGIBLE ASSET COMPANY: FAT PIPE NETWORKS INDIA LIMITED.

The company earned a net profit after tax of Rs 399.37 lacs for the year 08-09, which was transferred to General Reserve. The balance at the end of the previous year in General Reserve was Rs 49.97 lacs. If you add, the profit transferred this year, to the figure it should be Rs 449.34 lacs. Simple arithmetic. However, as per the statement of accounts as furnished in the DRHP filed with SEBI, the figure is Rs 2103.04 lacs. For the difference, the corresponding entry shown in the balance sheet is Intangible assets.

Consider the following risks factors:


• The Company operates in a highly competitive environment and the competitors could gain a significant advantage by introducing a new product in a particular segment before the Company does.

• The majority of the operations of the Company are carried out from its branch offices in the USA. Risks related to FEMA.

• The funds requirements are not appraised by any Bank or Financial Institution.

• The Company proposes to acquire businesses/companies located outside India, the company is yet to identify companies/ businesses to be taken over.

• The Company has not yet tied-up for debt component for enhanced working capital needs.

• The Company has not paid dividend in the past.

• The global operations expose the Company to complex management.

• The combined employee strength is 120 and 50% are in sales and marketing.

• The average cost of acquisition of Equity Shares by the Promoters is at Rs 10/-

• Receivables out standing as on 30-09-09 are at Rs1269.69 lacs, against a turnover of Rs 2958.68 for the same period.There are debts that are outstanding for more than 180 days.

• Details cash/bank balances are not furnished. That is, in which bank the amount shown, as on balance sheet date, was kept.

• No project to be implemented. Structured IPO.

• IPO grade -2.



EPS for the year FY 10-11 is expected to be Rs. 5.50 per share. At the lower end of the price band of 82, PE multiple works out to 15 times. Similar companies in IT networking equipments / manufacturing are presently ruling at PE of around 8 times.

Investors are advised to stay away from the issue.

FIRST CHOICE, RIGHT CHOICE

In the last week of April, six IPOs rushed to the market, to escape new SEBI guide lines which came in to effect from 1-May-2010.

Nitesh Estates limited offered shares at Rs 54/- now quoting at Rs 38/- almost 30% down.

Next was Tarapur Transformers. The shares were issued at Rs 75/- now 44% down quoting at Rs42/-.

Then came the big ticket IPO - JayPee infra. The shares were offered at Rs 102. On the listing day itself the shares were down more than 10% from the issue price.


FIRST CHOICE HAD RECOMMENDED TO STAY AWAY FROM THE ABOVE ISSUES. RIGHT CALL. EVERY TIME.

Mandhana Industries and SJVN Limited's IPOs were recommended for subscription. Both are trading above the offer price. (SJVNL - taking discount offered in to account).

TARA HEALTH FOODS - First choice had recommended to keep 100 km distance. The issue bombed.


AGAIN THE CALLS WERE CORRECT. THEN, WHY SEARCH ELSE WHERE FOR IPO ANALYSIS.
LOG ON TO FIRSTCHOICEIPOANALYSIS.COM

IPO INVESTING- KNOW YOUR MERCHANT BANKER

The IPOs which are quoting below the issue price and

the BRLMs associated with the issues that are listed

from 01-01-10 and until date, are furnished below.

NAME OF ISSUER	ISSUE PRICE	CURRENT PRICE - AS ON 03-05-10.	MERCHANT BANKERS/BRLM
SYNCOM	RS 75	RS64	Chartered Capital
VASCON	RS 165	RS 153	Kotak Mahindra, Enam Securities
EMMBI	RS 45	RS18	Keynote
DB REALTY	RS 468	RS 436	Enam Securities, Kotak Mahindra
HATHWAY	RS 240	RS 209	Morgan Stanley, UBS Securities, Kotak Mahindra
TEXMO PIPES	RS 90	RS 62	Almondz Global
PRADIP OVERSEAS	RS 110	RS 87	ANAND RATHI
SHREE GANESH JEWELLER	RS 260	135	Axis Bank Ltd.  ICICI Securities Ltd.  Avendus Capital
GOENKA DIAMONDS	RS 135	101	SBI CAPS
INTRASOFT	RS 145	130	Collins Stewart, Anand Rathi

CASTE BASED CENSUS

The Center has agreed to caste – based census as pressurized by the Yadav trio. The UPA has wafer thin majority in LS, RJD and SP who have twenty-five MPs, are extending outside support to the government. Their support is necessary to pass nuclear liability bill for which, there is strong opposition from the BJP and the Left parties. However, the Yadav trios are ignoring the writing on the wall, which is very clear. The next election  either at the state or center will be fought on the issue of development, providing basic amenities in the rural area like- education, housing, health, infrastructure and reforms, among others. The days winning elections only based on caste, religion/region is over. The young, educated and informed voters, who constitute more than 70% of the total electorate, is definitely not going to exercise their franchise based on caste considerations. The Yadavs have to adopt themselves to the changed political dynamics. Otherwise, they are, probably serving their last tenure in the Lok Sabha.

The new census should be used for the statistical purposes and for monitoring the various programme and policies of the government and the political parties should stop using the same for vote bank politics.

Investor Awareness initiatives through long distance Trains by NSE

After pioneering many initiatives to safeguard the interests of investors, India’s premier stock exchange, the National Stock Exchange has rolled out a unique initiative to promote investor awareness, literally on wheels. This is the first time that a stock exchange is conducting a mass outreach programme through the outdoor medium.


The programme was kick started on board the iconic Rajdhani Express today. The Delhi Chennai NSE Rajdhani was launched at the Nizamuddin station in the capital by the Chief Guest Mr. Prashant Saran, whole time member of SEBI. NSE’s MD and CEO Mr. Ravi Narain was also present on the occasion.



Starting today, the Delhi Chennai Rajdhani, the Delhi Bengaluru Rajdhani and the Delhi Trivandrum Rajdhani will run coaches that will carry NSE’s campaign on investor awareness. The coaches will be used on the three routes at different times of the week.



The 17 coaches have been splashed with the images of Nifty, NSE’s flagship index. Inside, important investor awareness messages have been given on panels. The motto of the campaign is soch kar, samajh kar, invest kar, a message to invest carefully.



The coaches also feature key information to investors on care to be taken before, during and after trading. These would include a list of crucial do and don’ts, importance of filling up Know Your Customer completely and correctly, important things to note while transacting on-line and understanding matters related to power of attorney, etc.

The campaign seeks to demystify Nifty 50 through pictographs and comic strips. An attempt is being made to spread awareness among investors on various products traded on NSE including Nifty futures and options, equities, equity futures and options, mutual funds, currency futures and exchange traded funds.

These messages will also be provided through audio visual messages inside the train. The idea is to empower the market participants and enhance the trading experience through focussed and relevant market-related education. The campaign is expected to cover over 2 lakh fifty thousand passengers crossing 34 locations across eleven states.