Coal India is coming out with India’s biggest IPO offering in the Stock Market History.The company seems fundamentally strong on almost all aspects and is also pricing itself at a significant discount to its global peers.Both superficially and deep down,the analysis points CIL to be a very safe investment at a cheap valuation.Other analysts are also coming to the same conclusion,as Rating Agency has given CIL a 5/5 Rating which is probably the first in the history of IPO Grading .In order to give a more balanced perspective and avoid herd tendencies,I am listing out what the risks and negatives are with this company.Note this does not make me negative on the stock on which I am very positively biased.It is just to give investors the other side of the debate which I think general analysis will lack.

Despite the above Risks , I think that Coal India is one of the best quality stocks to come out in India’s Primary Markets.However investors should be wary of the risks which will be glossed over by the mainstream media and brokerages . As with every investment however safe it might look,there are risks.This does not mean that investors should be fearful of every investment.It is by being aware of the risks,that prudent risk management can be done which is essential to successful investing.

The Crap continues to hit the Indian Primary Market with another Junk  Microcap trying to raise $11 mm from the market.The company will dilute around 48% of its total holdings to give it a market cap of around Rs 100 crore.The investment bank for this issue is Chartered Capital which  arguably brought out the crappiest […]

Coal India Limited (CIL) is the biggest IPO in the history of the Indian markets.The Company has generated a lot of investor interest because of a number of firsts.It is the largest coal producer in the world in one of the biggest demand growth regions.The company has excellent fundamentals being rated 5/5 by the rating agency.The government has disallowed anchor investors for the IPO as it finds that allocation could be construed as biased.Note Anchor Investors in Indian IPOs are favored investor who are preallocated a fixed amount of shares by investment bankers.This is similar to the US practice where all of the IPO is offered to institutional investors by investment bankers solely on their discretion.India is much more egalitarian in its approach to IPO regulation with a fixed amount 35% reserved for retail investors .The pricing of the issue has been a hot topic of speculation with the expected price range to give it a multiple of around 15x which is around 20-30% cheaper than comparable large US and China coal companies like Massey,Shenhua and others.

Real Estate Companies have been trying to raise money from the primary markets for a long time.The depressed markets and the negative sentiment about the real estate sector had prevented that from happening.Realty companies are known for their “creative accouting” shenanigans and their financial statements are not even trusted by Fund Managers.However the Current Bull Run has sparked renewed interest in all sectors even depressed ones like Realty.This has presented a golden oppurtunity for Real Estate Companies to do IPOs.While the last 2 Real Estates issues Jaypee Infratech and Nitesh Estates were disasters,this ones looks better than the last 2 lemons.Oberio Realty has good profits,cash flows and zero debt.This makes their issue much better,however the Realty Sector is a dangerous one to play because of the corruption that pervades the entire industry.So you make an investment here not really knowing what you are getting into.Not a Warren Buffet Investment by a long shot.The upside is limited with huge amount of downsides in the form of unknowns.Here are some of the features of Oberio Realty

2) Expensive Valuation – Despite Negative Cash Flows for 3 out of the last 5 years,Cyclical Industry and Customer Concentration Risk,the Management wants around 35x P/E Valuation for their company.This is quite amazing as I would not consider the company a Buy at even 20x.However even shadier and crappier issues have managed to listed.Prakash Steelage,Aster Silicates are all examples of investors trying their hand at such Junk.

3) Customer Concentration – The Company is dependent on a few customers like Tata Motors and Indian Railways for most of its revenues.Competition for supplying Wagons to Indian Railways has increased drastically with even State Owned Companies joing the fray.CV is a cyclical industry and margisn in the CV Body Building Business are nothing great.The Company has failed to show consistent margins in the business

Summary

This is one of the more crappier issues to hit the market.Investors should not be even considering subscribing to the issue given the bad management history,cyclical sector and competition.Margins are nothing great.Growth has been inconsistent and the stock is overvalued even at half of its asking price.

India has seen a flurry of IPO’s in the current month of September 2010 as the companies IPOing in this month will not have to submit the June end quarter financials.A Number of good IPOs have been mixed with a number of bad ones.However SEA TV Network is the crappiest of the lot by a […]