Yet another Junk IPO Tarapur Transformers in the offing

After two junk IPOs in the last 10 days in the Indian markets another one has come up.As I was refererring to in my last post I thought Nitesh Estates was a really low quality offering but Tarapur Transformers really takes the cake.

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 mulitples 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.