IPO Update : Minar International

High on Risk, low on returns

Minar international has entered the capital markets with a public offer of 69 Lac shares at a price band of Rs. 108-115. Investment Guru recommends investors to stay away from this IPO since there are much better players available at these valuations in the secondary market.

Let’s dig into the company :
Minar started its operations in the year 1981, with the main object of trading and export of home textiles/Made ups in the international market.

Minar has been the largest merchant exporter in made-ups for five years of the quota period. The company has been exporting made-ups to the US markets.

The company is proposing to set up a fabric processing plant in Erode, Tamil Nadu. This plant is likely to commence operations by April 2007. The IPO proceeds would be used for the above.

CRISIL has assigned an “IPO Grade 2” to the IPO of the company.. This grade indicates that the fundamentals of the issue are below average relative to other listed equity securities in India.

The company has mentioned Strong Management Team, Infrastructure Set-up, Commitment to Quality, Strong Customer Base & Delivery Capabilities as its strength.

The financial performance looks good considering that the Topline has grown three fold from Rs. 114 crores to Rs. 336 crores. Net profit after tax has also reflected similar pattern and has grown from 5 Crore to 14 Crore.

In its justification for issue price, the company has mentioned Zero Rejection Rate, Capability to Manage Multiple and Large Orders & Strong Customer Relationships as the quality parameters.
The weighted average EPS comes to Rs. 17 (pre-issue). However, Post issue on a equity capital base of Rs. 24 Crore, the Post issue EPS works out to be Rs. 6. This translates into a P/E of 17-19.

The Pre-issue Net Asset Value per share comes to Rs. 38

The company had Negative cash flows from operating activities in FY06 to the tune of Rs. 24 Crore.

The company has mentioned Bombay dyeing and Alps industries as peers and these company are currently quoting at PE of 40 and 7 each. However, one should note that Bombay dyeing is enjoying high PE based on the realty play which is not the case with Minar.

Well established market players like welspun is quoting at PE of 17 while Alok industries is quoting at PE of 10. This makes Minar’s offer price highly demanding.

Issue Opens : 25-Sep-2006
Issue Closes : 29-Sep-2006
Registrar : Intime Spectrum Registry Limited


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