Wednesday, April 13, 2011

Servalakshmi Paper IPO - Analysis, Review, Recommendation

Servalakshmi Paper, a paper manufacturer has come out with an IPO of Rs 60 crore. The company is engaged in the business of manufacturing printing and writing paper and newsprint. It has total installed production capacity of 90000 MTPA.

The IPO will open on April 27 and will close on April 29. The company has fixed the issue price band at Rs 27-29 a share.

The company proposes to utilize the net proceeds of the IPO for purchase of equipments for producing value added products, augmenting long term working capital requirement and to meet the preliminary and pre-operative expenses.

The company has embarked upon setting up an integrated paper mill with a capacity to produce 300 tonnes per day along with a 15 MW multi-fuel captive power plant at a single location. The total investment is estimated to be Rs 340 crore and the entire project is set to be completed in two phases. The company has successfully completed the phase-I of the project in all respects and started the commercial production on April 1, 2010. The company intends to meet the requirements of phase-II through the proposed IPO.

Keynote Corporate Services Limited is the book running lead manager to the issue and Indian Overseas Bank is the co–book running lead manager to the issue. Link Intime India Pvt Ltd is the registrar to the issue.

Recommendation:
ICRA has assigned Grade 2 to the IPO indicating below average fundamentals. We would not recommend this IPO to investors at this time.


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