Category: India IPO Reviews and Updates

Purvankara Projects, Dirty and Polluted Bangalore / Bengalooru based Realty Developer is offering shares to the public to raise around Rs 1,100 crore. We do agree that Purvankara is a good quality Developer but we recommend our value investors to Blindly Avoid the IPO as it is Expensive.

Background:
Purva has 74% of its Land Bank in Bangalore / Bangalore District. It also operates in Chennai, Kochi, Coimbatore and Colombo. On 2 July 2007, had a land bank of 38.07 million sq ft, representing a 106.8 million sq ft of saleable area. The area under development represents 8.5 times the amounts booked and 55% of its projects have been sold, revenue visibility is high. The realisation target is Rs 3200 per sq. ft. The average cost of construction is Rs 1500 per sq. ft.

Concerns:
Purva’s prospects etc are not as sunny as they look. They have a debt of 676 crores and liablities of another 483 crores. So in a way of speaking the entire proceeds of the IPO can goto fulfill these obligations. Union government recently banned real-estate players and township developers from accessing external commercial borrowings (ECBs) to fund projects. Over the past couple of years, there has been a significant increase in interest rate and prices of real estate. This has increased the equated monthly installment (EMI) on housing loans. With IT companies under severe pressure from Dollar, pay packets for IT employees are also under pressure. Purva has just around 25% folio in the Commercial Real Estate category which will see lot of demand from Retailers in India.

Current IPO:
IPO Band Rs 500-Rs 525
IPO offer size Rs1,073 crore to Rs1,126 crore
Post Issue Equity of Rs 5 each: 21.34 crore shares

Valuation:
Consolidated FY 2007 EPS on post-issue equity works out to Rs 6.1. At the offer price band of Rs 500 Rs 525, the P/E range is 81.9-85.9, respectively. [Higher that that of DLF and Unitech] Comparable listed player according to size is HDIL, currently trading at 24.6 times its consolidated recurring FY 2007 earning. Motilal Oswal values Purvavankara at mere Rs 508/ share and this company is expecting Rs 525 from the Public.

Recommendation:
The issue looks very expensive and going forward real estate prices maybe headed for a correction. Dependence on just Residential Realty market and asking money at a valuation higher than that of DLF makes us recommend to stay away from the issue.

The IPO of Central Bank of India was subscribed 62.07 times. Retail participation was also extremely good. Here is the final Tally.

All retail application of 960 shares @ cut off are likely to get 60 shares, but may go in for a lottery too. Check back for the status of allotment here.

The allotment status of Everonn Allotment status can be checked here.

Central Bank of India [CBI] has the third largest network in the country with 3,194 branches (with major presence in central, eastern and western parts of the country). It has an employee base of 36,227 employees serving over 2.5 crore customers. Around 98% of the bank’s business has been computerised as at the end of March 2007 with 353 branches covering 35% of the bank’s business covered under core banking solution.

CBI cleans up Balance Sheet:
The bank restructured its capital base in March 2002 by netting off accumulated unabsorbed losses of Rs681.3 crore against its paid-up capital of Rs1,805.5 crore. On March 2007 the balance equity capital of Rs1,124.1 crore was further restructured and converted into Rs800 crore worth of noncumulative perpetual preference shares and Rs324.14 crore of equity capital.

NPAs are on a decline since 2003 and at an all time low of 1.7% to net advances which is still a high compared to Bank of Baroda at 0.9%.

Current IPO Offer:
Issue Size – Rs 680 – Rs 816 crore.
Pricing Rs 85 – Rs 102
Retail offer – Rs 272 crore

Valuations:
Based on the price range of Rs85–102, CBI is available at (1.1–1.2)x its post-issue book value (BV) and (1.5–1.7)x its post-issue adjusted book value (ABV). The bank has a return on equity of around 13%, a dividend yield of 3% (based on the upper price band).

Recommendation:
Being the 3rd largest banking network in the fastest emerging economy of the world, CBI will attract heavy FII interest pre and post IPO. Investors with appetite for long term capital appreciation are requested to HOLD after allotment [You see what happened to Indian Bank] and Investors who want to SELL on allotment can also do so. We recommend a subscribe to CBI IPO for our readers.

Indian Banks are in much better shape than their Chinese counterparts and Indian banks attract cheaper valuations and are unexpected to cool off. Drastic measures by the RBI may hit their bottomline in short-term. Long Term Investors just hold your investments tight.

Suggestions and Comments maybe sent to “feedback @ DalalStreet . Biz”

The IPO of Zylog Systems for which we had a SUBSCRIBE recommendation was heavily subscribed by Retail and Institutional Investors. Total over-subscription 76.51 times. Here is the final break up.

The fate of Rs 98,000 application will also be decided by lottery. Ratio of allotment for Rs 98,000 application will be 1 : 2.5. Grey Market Premium si already Rs 150+. Good Luck!!!

Omnitech Info Solutions:
The issue was oversubscribed by 61.84 times. Here is the final breakup.

The stock is expected to list at Rs 150. Good Luck for your allotment. We strongly recommend value investors to AVOID IVR Prime Urban Developers IPO.

We have carefully analyzed the Public Issue offering of IVR Prime Urban Developers and recommend value investors to AVOID the issue.

IVR has just completed one Residential project in Hyderabad. Cushman & Wakefield had valued projects using net present value of the projects in the range of Rs 4998.4 crore and Rs 5524.6 crore after deducting the developers margin, the net present value of the land reserves was between Rs 2889.8 crore and Rs 3194 crore. The per share value after deducting the developers margin works out to Rs 450-Rs 498 per share.

Consolidated FY 2007 EPS on post-issue equity works out to Rs 3.3. At the offer price band of Rs 510 – 600, the P/E range is 155-182.4, respectively. Comparable listed player according to size Ansal Properties and Infra is currently trading at 24.7 times its consolidated recurring FY 2007 earning. Nearest location-wise comparable company Sobha Developers is trading at 41.6 times its FY 2007 earning.

We recommend VALUE Investors to BLINDLY AVOID the IPO of IVR Prime. Fundamentals of the market will return and this Bull Market and Party won’t last forever. Don’t commit your hard earned money to worthless promoters and fly by night operators. Please don’t be tempted by Listing Gains or whatever stories your broker tells you. Stick to Fundamentals and Stick to Diversified Folio. You will make lot of money in the long run.

Zylog Systems is promoted by first generation entrepreneurs Sudarshan Venkatraman and Ramanujam Sesharathnam. It is a global services provider with major focus on application development and integration including web application, web services, application integration, business Intelligence, data warehousing and mobile and wireless applications; enterprise infrastructure management and quality assurance & testing.

Zylog is a very small company 1/15th the size of Infosys. The company has business concentrations in the same verticals as Infosys does.

Current Offer:
36,00,000 Equity shares within the price band of Rs 330 to Rs 350 aggregating mere Rs 126 crore.
Fully Diluted Equity Post IPO = 1.65 Crore Equity Shares of Rs 10 each.

Valuations:
At the price band of Rs 330 – Rs 350, FY 2007 EPS (on post-issue equity) of Rs 33.2 is discounted 9.9-10.5 times.

The stock looks reasonably valued and leaves good scope for appreciation. Since the issue is very small, Investors who are lucky and have chances of allotment can blindly subscribe to the IPO. Even the fate of Rs 100,000 application will be decided by lottery. The stock will be easily listed upwards of Rs 525 as the Grey Market Premium is upwards of Rs 150.
Good Luck!!!