Slideshow

Cheap Web Hosting Sites

Social Icons

'

Tuesday, September 20, 2011

RDB Rasayans Limited IPO Analysis Report

RDB Rasayans Limited IPO Review
Issue Highlights
Issue Period: 21/9/2011 to 23/9/2011
Issue size: 45, 00,000 shares
Face value: Rs. 10
Issue Type: 100% book building
Price range: Rs. 72 – Rs. 79
Market Lot:  80 Shares
Maximum retail Subscription: Rs. 1, 95,920
Industry: specialized packaging

Objects of the Issue
·         To  enhance the manufacturing by 7450 MTPA by establishing the second unit
·         To meet issue expenses and general corporate purposes
·         Loan repayment
Company & industry Profile
Indian packaging industry is worth 14 billion USD ($) and is growing more than 15% per annum. With rapid growth in markets like food, beverages, pharmaceuticals, textile has given a fillip to the specialized packaging industry.
Food and pharmaceutical collectively constitute the 75% of the packaging demand.
RDB Rasayans Ltd., an ISO 9001:2008 certified company involved in the manufacturing of PP tapes, PP woven sacks, woven fabrics, industrial woven fabric, pp woven fabrics and PP woven bags.
Main products
  PP fabric is used for the packing of fertilizers, chemical, cement, polymers, textile, automobile etc.
Advantages of PP woven bags over jute bags
·         Light weight
·         Resistance to chemicals
·         Pp bags can withstand the temperature up to 100 degree Celsius
·         Properties like eater repellency and higher resistance to dropping,
Threats
·         Company has very concentrated customer base, top-ten customers constituted the 85% of the income in FY 11
·         Negative cash flow from operations for the FY11
·         No dividend paying track record

Financial Analysis #

EPS
1.02 Rs.
Book Value
10.09 Rs.
P/E
77.45
P/B
10.09
NPM (Net Profit Margin)
3.9%
ROE (Return On Equity)
10.1
ROCE (Return On Capital Employed)
16.6
Debt/Equity
.7
Interest Cover
4.51
CAGR (Profit)
3.8
PEG
20.4
M-Cap/Sales
3.03
M-Cap/Reserve
30.02
Net Asset Per Share
10.09
Inventory Turnover Ratio
4.84

#
·         Post issue equity(outstanding shares) is used for the calculation of EPS,BV & ROE
·         All calculations at upper price band of Rs. 79

Comparison with peer’s #

Attributes
P/E
ROE
NPM
ROCE
RDB Rasayana
77.45
10.1%
3.9%
16.6%
Polyplex Corporation
3.4
55.46%
17.91%
38.7%
Essel Propack
15.68
5.76%
6.77%
13.72


#
·         Source of peer companies’ data  is moneycontrol as on 20/9/2011
·         Essel Propack data is for FY 10
Inference
RDB Rasayans limited company’s equity was already diluted and post issue shall further dilute, which means post issue EPS shall be reduced to Rs.1.02 only translating into  whopping price to earnings multiple of 77.45 which is stupendously high.
4 year Profit CAGR of the company is as little as 3.8 % and thus PEG ratio is in access of 20.
This means valuations are highly stressed and the issue is much overpriced.
Company works on very little net profit margin of 3.9% and top-ten customers are responsible for the 85% of the income, and this is very risky proposition even a loss of single client could be fatal.
While comparing with its peers, one can understand how overpriced this issue is.
Investors should clearly avoid this issue.
Disclaimer
Analysis is for the information purpose only. Though due diligence has been taken while preparing this report, analyst shall not be responsible for any error and shall not bear any financial liability to the users of the report.

0 Comments:

Post a Comment

Related Posts Plugin for WordPress, Blogger...