Sunday, May 1, 2011

Sanghvi Forging IPO - Analysis, Review, Recommendation

Sanghvi Forging and Engineering, a forging products manufacturer, has come out with an IPO of Rs 36.9 crore. The company is a manufacturer and exporter of forging products for the non-automotive sector. It manufactures forged flanges, forgings and machined components for various industries like oil & gas, fertilizers, power, desalination & water treatment, ship building, defence, fabrication of process equipments, instrumentation etc.

The IPO opens on May 4 and will close on May 9, 2011. The company has fixed the price band at Rs 80-85 a share.

The proceeds of the IPO are proposed to be used for partly financing the cost of setting up 15,000 MTPA open die forging unit (with single piece forging up to 40 MT) to manufacture proof machined products viz. stepped shafts, bars & hollows, blocks, flanged shafts, gear blanks, forging items.
Some portion of proceeds will also be used for working capital for the new project and for pre-operative expenses including issue expenses.

Arihant Capital Markets Ltd is the book running lead manager to the issue.

Recommendation:
CARE has assigned Grade 3 to the IPO indicating average fundamentals. We would not recommend this IPO to investors at this time.