Ashoka Buildcon IPO Review – Fast Growth Leveraged to Indian Infrastructure Story but Management and Valuation Questionable

22 Sep, 2010
IPO,Real Estate and Construction

Ashoka Buildcon is a Construction Company primarily focused on the Road Segments.Given India’s huge demand for infrastructure and roads,the company is growing at 50%+ growth rates.However the quality of management is suspect given tax seizures,criminal cases and related transactions.The valuation of the company is also not cheap at around 22-23x P/E and around 3x P/B.The Company has grown at an excellent rate while maintaining a Net Margin of 8-10%.

Summary

While I like the Road Sector in India and the Company is a well positioned company in this sector,I hate to invest in a company where Management seems untrustworthy.The valuation of the company is not exactly cheap either without being very expensive at around 20x.However if something bad happens Macro wise then expect the stock price to plummet .There are other companies in the Road Sector like IL&FS which operates in the same segment but has a better management trust quotient.

VA Tech Wabag IPO Analysis – Quality Global Water Management Company with Good Management,Technology and Strong Order Book

22 Sep, 2010
IPO,Real Estate and Construction

VA Tech Wabag is one of the best quality companies to come out with an IPO in the Indian Market in 2010.The Company boasts of a quality management,good technology and fast growth.Despite a hiccup in 2009,the company has picked up its growth in 2010 and operating in a fast growing Water Industry with good execution,it looks to have little downsides.While Low Net Margins and High Working Capital is a characteristic of the EPC sector it operates in,the company has constantly been able to improve on those parameters.

Summary

There is almost nothing to dislike about the company except the valuation which is a tad expensive at around around 28-30x,however the sector P/E is also around 30-35x and VA Tech Wabag deserves a premium.Given the high quality of the company and the Water Sector it operates in,I would invest in the company as the future growth is tremendous.Also the international diversification and the Recession Proof Water Industry makes this investment safer than your normal Indian EPC company which are asking for the same valuations.

Ramky Infrastructure Analysis – Good Sector and Company but Valuation leaves Little for Investors

21 Sep, 2010
IPO,Real Estate and Construction

Cons

1) Valuation – The Valuation of the company is not cheap at around 3x P/B and around 28-30x P/E .But with companies of the same quality going in for around the same if not higher valuations,why would the company sell the shares at a discount.This however does not make it better for investors who get very little for investing in a newly listed company.This stock is an unlikely candidate to be multibagger

2) Negative Cash Flows – The High WC Requirements of the Sector and Fast Growth has meant that the Operating Cash flows of the company have been negative in the last 3 years.

Summary

The Company and the Sector in which it operates is a good one,however the Valuation has discounted most of the good things about the company.The company has very little to be negative about except the high working capital ,negative cash flows and the like.But that is a feature of the Construction Sector rather than anything negative about the company.The high valuation given to the issue makes it avoidable given better opportunities in the Indian market.

Electrosteel Integrated IPO – Investing in the Parent ECL might be safer way to play

21 Sep, 2010
Coal,IPO

Electrosteel Integrated is coming out with an IPO to raise around $50mm to fund its 2.2 million ton plant in Jharkand,India.The company is promoted by its listed parent Electrosteel Castings which has been running for the past 30 years and is leader in the Ductile Pipe Category.This company will have ECL holding of 34% post IPO with the other major shareholders being a bunch of PE firms and Stemcor.The plant construction will require around $1.5 billion capex out of which around 40% has been already been spent.Debt will be around $1.1 billion mostly at 12.25% interest rate.
Summary

The company has pluses as well as risks,however the plant should start operating in Oct 2010.While the investment is risky,the valuation being offered is cheap with good promoters.For people looking at lesser risk,ECL the parent company also makes a lot of sense.It is trading at 8x trailing P/E and around 1 P/Bx which is again cheap.It has a 34% share in the new company so will gain from any upside as well.Its investment in the company is Rs 700 crore with a total market cap of around Rs 1600 crore.Not expensive and a safer way to invest in

Cantabil Retail IPO Analysis – Average Company in a Bad Sector makes it Avoidable

20 Sep, 2010
IPO

Bad Part

1) Bad Sector – It is marked by very high working capital,low margins,high competition and volatility in raw material prices.While Cantabil has grown well,the sector is hardly to excite someone about.The company’s expansion plans will need lead to any dramatic improvement in its business model.

Summary

There is nothing to dislike about the company,however there is nothing to like about it either.Valuation at around 12x is not expensive however the risks of the sector and the smallness of the company does not make it very cheap either.Manufacturing in house,reduction of working capital might make it attractive later on. However I would give it a pass as there are better opportunities around.

Hydro Power in India causing Environmental,Wildlife and Tribal Rights Concerns

20 Sep, 2010
Energy,Hydro Energy,PSU

Earthquake Vulnerability – Large Dam Construction has been linked to increased propensity of Earthquakes.Massive Earthquakes in China and Uttarakhand in India were linked to the building of Massive Dams in these countries.Building of Massive Man Made Structures along geologically sensitive areas has not been properly studied and understood till now

Summary

While Hydro Power is a necessity for an energy starved and growing economy like India,its effect have to be properly assessed and understood before going on a hydro binge.NTPC lost almost $300 million after its 600 MW project was canceled 5 years after getting permission.This was done in the face of large scale protest by local groups and NGOs.2 other projects in Uttarkhand have also been rejected leading to more losses.

Page 130 of 152
1st
...
← 126 127 128 129 130 131 132 133 134 →
...
Last

Most Popular

Recent Comments