KR Choksey has the following Views on the IPO,
At upper band of the issue, FIL is priced at 1.6x its NAV of Rs 94.7/Share and 10.8x its FY11 earnings of Rs.14.3/share (post issue). Although the company is a market leader in FIBC Segment and has ventured into niche business segments like Geo textiles, we believe value accretion would be seen only post expansion from FY12-13 onwards. We recommend our investors to “AVOID” the issue in absence of proven consistency in performance, aggressive pricing, negative operating cash flows since last 5 years coupled with lower margins and considering the fact that a third of the IPO is stake offloading by Clearwater Capital Partners (Cyprus) Limited (50% offloading).
Sunidhi Research has the following Recommendation,
FIL exports to around 30 countries across the globe and are present in four continents with major thrust of exports being to USA and Europe. Its exports for FY11 stood at 76% of sales. The company on account of its technical competencies, ISO certifications like Det Norske Veritas (DNV) for quality and British Retail Consortium (BRC) and American Institute of Baking for global food safety packaging standards and consistent quality to service client requirements has helped it to win repeat orders. As on FY11, the company’s debt/equity ratio improved to 1.9x as compared to 3.5x in FY10.
The P/E ratio for the share on the pre-issue basis works out to 7.4x on lower band of `145 and 7.9x on upper band price of `155 per share on EPS of `19.6 for FY11 on equity capital of `17.2 crore.
