India's Publicly Listed Oil Companies remain Captive to the whims of the Government
May 20, 2010A Chronology of the Greek Contagion as Risky assets take another Big Fall
May 20, 2010SJVN was one decent quality company to offer shares amongst the sea of junk initial public offerings.The government which had faced tepid response to the IPO of its state owned companies earlier in the year tried to leave something on the table for the investors with SJVN.But considering the price action today it seems the government has failed to leave even bare crumbs for the SJVN investors (at least till 2 pm).Considering that the Government is planning to list more companies in the current year it will have to reconsider its Strategy once again .
India has seen a raft of IPOs in the past 2-3 months which are of dubious quality and barely manage to get subscribed . Tarapur Transformers heads the list of these junk IPOs. I did not understand why the Tarapur got subscribed at all considering the non existent fundamental reasons .However Indian markets routinely see such junk get listed with help from “friendly circles” .Tarapur has already costs its investors more than 30% in the week since its listed and considering its fundamentals , the investors will have to wait a long time to regain even their capital much less any positive returns.Here is what I wrote while analyzing with Tarapur Transformers from its prospectus
It is raising around 125 crores at 50 times P/E and more than 6 times P/S. This from a company which has negative operating cash flows in the last 4 out of the 5 years . Note the other companies in this space have got multiple which are much lower than this stock which has pathetic financial and operational parameters. This sort of valuation is generally reserved for very high growth , high quality companies . The i-bankers of this company “Comfort Securities” look equally shady if they are willing to IPO such a company . Guess this is one stock where you can be sure that only vested parties would be buying the stock.No right minded rational investor would even think of putting a paisa into this company. The Rating Company Crisil has at least done a decent job by grading it 1/5 though I think a negative rating would be more appropriate.
Here is a list of some of my postings on the Indian Junk IPO market
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Texmo Pipes seems a classic case of “Pump and Dump”
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Tara Health Foods Fails to Get Subscribed
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Real Estate IPO Nitesh Plunges 6% on Listing
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Texmo Pipes seems a classic case of “Pump and Dump”
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Cattle Feed Company “Tara Health Foods” gets No One to Chew
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Jaypee Infratech IPO just manages to scrape through at lower end of price band despite Nine I-banks selling it
7 Comments
[…] with SEBI reveals that it might be an interesting small cap company to buy . Given the flood of low quality junk IPOs hitting the market , Fatpipe Networks looks good on a high level review and analysis .There are not a lot of genuine […]
[…] the fall in the stock price might have been due to the poor fundamental and pricing of the company.SJVN which listed a day before has fallen only 5% after listing at the top end of the book building range.I may be wrong and Jaypee Infratech may […]
Hello Abhishek,
I agreed with your initial observation on SJVNL that it leaves something on the table. But then, here you observe there is nothing on the table.
Does it make sense to revise or pass the judgment in single day of trading?. It takes years for this type of company to show any tangible benefits of increased earnings or profitability (assuming it continues to be well run).
Any thoughts?
I am with you on other IPOs being a junk. SJVNL was an exception.
Best Wishes,
I wrote the second observation as the Govt’ intent ( if I deciphered it correctly) would let investors get some listing gains.I was not passing judgment on the fundamentals of SJVN which I incidentally like.
Listing gains – Got it.
Thanks
[…] for the government.The other FPOs of companies like NMDC and NTPC have not been a big success.Even SJVN which promised to leave something on the table for investors proved to be dud on that respect.One thing is for sure that EIL is also not going to be hugely […]
[…] Government has also raised money through Follow on Offerings and IPOs of Power Companies like SJVN ,NTPC and REC.The performance of these companies after listing has been mixed with a number of […]