Wednesday, June 16, 2010

Technofab Engineering IPO

Analysis
Technofab Engineering (TEL) has come up with an Initial Public offering (IPO) of 29,90,000 equity shares of face value of Rs 10 each (the Issue) for cash at a price to be decided through a 100% book-building process. The Issue comprises of a reservation of 50,000 Equity shares of Rs.10 each for eligible employees.

TEL is engaged in the business of providing Engineering Procurement and Construction (EPC) services, and executing a wide range of Balance-of-Plant (BoP) and electro-mechanical projects on a complete turnkey basis.

Technofab Engineering provides EPC services to domestic and overseas markets across a number of industrial and infrastructure sectors which includes conventional power, nuclear power, oil & gas, water & waste water treatment, electrical distribution & rural electrification and other industrial & infrastructure sectors. Apart from India, the company has presence in international markets like Ethiopia, Kenya and Fiji.

The IPO opens on June 29, 2010 and closes on July 2, 2010. The price band has been fixed at Rs. 230-240.

The company is proposing an initial public offering to meet long term working capital requirements of Rs 300mn, finance procurement of construction equipment for Rs 162.38 mn, finance setting up of maintenance and storage facility for construction equipment for Rs 49.95 mn, setting up training centre for employees for Rs 54.07 mn and balance for general corporate purposes.

The company is performing decently well and has achieved a turnover of Rs 2003.70 million, PAT of Rs 190.90 million & networth of Rs 499.77 million for FY 2010 (standalone basis). Between FY 2008 to FY 2010, the company’s sales increased at a CAGR of 48% and PAT has grown at a CAGR of 189%. Its order book stands at Rs 5337.40 million as on 31st March, 2010 which is 2.7 times sales of FY 10.

The shares of Technofab Engineering Limited will be listed on the BSE and NSE.

Collins Stewart Inga Pvt. Ltd. is the sole book running lead manager to the issue and Link Intime India Pvt. Ltd. is the registrar to the issue.

Recommendation
Fitch Ratings India Private Limited has assigned a grade of 3 out of a maximum of 5 to the proposed initial public offer of TEL. The grade indicates the average fundamentals of the issue relative to other listed equity securities in India. We would recommend investors to stay away from the IPO at this time as the global markets are on a downturn. The issue and company is good but would not recommend investing at this stage.

Subscription
The IPO finally got subscribed 12.78 times. At the close of the IPO,
QII segment got subscribed by 4.28 times
NII segment got subscribed by 48.85 times
Retail segment got subscribed by 10.03 times
Employee reservation segment got subscribed by 1.1 times

Allotment
Click here to check if you have been alloted technofab engineering shares!

Listing
Technofab had a good listing on the stock exchange on day 1. The stock closed at Rs 296, with gains of 23.33% over its issue price of Rs 240 per share on NSE. It has seen an intraday high of Rs 307.80 and low of Rs 268, after opening the session at Rs 276. On the BSE, the share ended at Rs 295.65, after witnessing day's high of Rs 307 and low of Rs 265.


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