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Sunday, September 18, 2011

Prakash Constrowell Limited IPO Analysis Report


Issue Highlights
Issue period: Sep 19, 2011 to Sep 21, 2011
Issue size: Rs. 60 crore
Issue Type: 100% book building
Price range: Rs. 130 to Rs. 138
Face value: Rs. 10
Market lot: 50 equity shares
Registrar: Bigshare Services Pvt. Limited
Maximum retail limit: Rs. 1, 93,200
Company Profile
Prakash Constrowell limited is an infrastructure development and civil construction company which provides EPC (Engineering, Procurement and Construction) services.

Company is headquartered in Nasik (Maharashtra) and its client is government/semi government bodies and private players.

Company is registered as class 1A contractor PWD (Public Works Department) of GOM (Government of Maharashtra) and operates in following segments of construction-
·         Infrastructure development including construction and maintenance of roads/highways, bridges and other civic amenities including PPP (public private partnership) projects
·         Civil construction like government staff quarters, hostels and auditoriums
·         Residential and commercial real estate construction
Objects of the issue
·         General corporate purposes and public issue expenses
·         To purchase the construction equipments
·         For working capital requirement
·         To invest in subsidiaries
Risks
·         Business is concentrated in Maharashtra region
·         Smaller order book of Rs. 117 crore only (March 2011 figure)
·         Negative Cash flow from operations  for past 3 years  is a concern
Financial Analysis #

Parameter
FY 10
EPS
Rs. 5.99
Book Value
Rs. 16.65
P/E
23.04
P/B
8.29
ROE (Return on Equity)
35.97 %
NPM (Net Profit Margin)
6.64%
ROCE (Return on Capital Employed)
30.6%
CAGR (Profit) 3 year
56.7%
PEG
.4
Interest Cover
9.32
M-Cap/Sales
1.49
M-Cap/Reserve
8.45
Net Asset per Share
Rs. 16.65
Debt/Equity ratio
.49


#
·         restated consolidated account statements used
·         all calculations at the  upper price Rs. 138  of the price band
·         post issue outstanding shares used for the calculation of EPS and the Book value
Inference
Post issue EPS of Prakash Constrowell shall be reduced to Rs. 6 only and at the upper price band of Rs.138, it shall translate into the Price to Earnings Multiple (P/E) of 23, which is too high for small company like this. Company operates predominantly in Maharashtra region and that too with the order book of meager Rs. 117 crore. It is an open secret that companies working in civil construction undertaking government projects, need to maintain good rapport with the Bureaucrats and politicians and change in government could be fatal as companies may not get further projects. In the FY 2011, sundry debtors have become 8.5 times of the same of FY 10, shows that company is finding difficulty in the realization of the project cost. This issue is being float in the high interest regime and interest rates are not yet picked, and RBI may come up with more policy rates hike, which shall be detrimental for civil construction companies as infrastructure projects are generally deferred till softening of the interest rates.
Investors, better avoid this issue.

Prakash Constrowell Limited IPO Review

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