(A) Issue Highlights
(1) Issue Period: 29/6/2012-4/7/12
(2) Price Band: Rs. 55-60
(3) Issue Size: Rs. 55 crore
(4) Issue Type: 100% Book Building
(5) Market Lot: 100
(6) Face Value: Rs. 10
(7) Maximum Retail Subscription: Rs. 1,98,000/ 33 lots
(8) Registrar: Bigshare Services private Ltd.
(9) Listing: BSE,NSE
(10)Industry: construction
(B) Company Profile
VSK projects Ltd. is Mumbai based ISO 9001:2008 certified EPC
(Engineering Procurement & Construction) company that undertakes various EPC
projects of steel turnkey piping, civil land development, industrial infra
projects, structural fabrication, fire fighting projects and many more.
Company’s order book as on 31/12/2011 was around Rs. 98 crore.
The company’s Major clients include Thermax Engineering, PACL India
Ltd., BLA Power Ltd., Deepak Fertilizers, Lanko Infratech Ltd. and Reliance Gas
transportation Infrastructure Ltd.
(C) Objects of the Issue
·
To meet long term working capital
requirements : Rs.15 crore (150 million)
·
To finance the procurement of
construction equipments and key machineries : Rs. 22.64 crore(226.4 million)
·
To finance the setting up of
engineering design studio/office and training center in various big cities: Rs.
10 crore (100 million)
·
General corporate purposes: NA
·
Issue expenses: NA
(D) Financial analysis#
# All calculations at the upper price
band
# Post issue equity used for FY 12
calculations
#post issue outstanding shares figure
used is tentative
Parameter
|
FY 12 Annualized
|
FY 11
|
EPS
|
Rs. 3.3
|
Rs. 3.9
|
P/E
|
18.3
|
15.2
|
P/B
|
5.6
|
3.7
|
NPM
|
4%
|
5%
|
Debt/Equity Ratio
|
3.1
|
2.1
|
ROE
|
30.5%
|
24.7%
|
ROCE
|
25.5%
|
17.1%
|
Interest Cover
|
4
|
2.9
|
(E) Inference
Prima facie financials of this company
may appear satisfactory but actually they are not. Receivables constitute
around 91 % of the current assets of the company which is quite spooking-in
case of any default company’s operation shall come to a standstill.
The balance sheet shows zero
investment and that is strange for a company which shall boast an M-Cap of Rs.
103 crore post-issue. (At the upper price band).
In FY 12 Company’s reserve grew around
2.16 times but no increase in cash & bank balance, fixed assets, or the
investment-which is zero. Secured debts of the company doubled while current
liability grew 7.6 times in FY 12.
Cash flows from operations is consistently
negative for past several years. Top five clients constitute the 90% of the
order book and the ‘Sales to Order Book’ ratio is barely one which should be at
least 2.5.
The company desperately needs the
money for its working capital requirement.
Valuations of this issue are high, Valecha
engineering and Tantia constructions fall in the similar M-cap category while they
are trading at a price-to-earnings multiple of 4.5 and 11 respectively.
Considering all these facts, business
prospects of this company are not healthy and investment in it should better be
avoided.
( 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.
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