IPO Update : Suryachakra Power corp. Ltd.

Suryachakra : Lacking the Power Punch !

Suryachakra Power corporation limited has eneterd the capital markets with an offer of 3.4 crore shares at a price band of Rs. 17-20 per share. Investment Guru is of the view that Suryachakra is a small player in its segment and hence doesn't command economies of scale which is an differentiating factor in the power industry. The IPO has also been priced very aggresively compared to company fundamentals. The outlook for power sector has been optimistic given the governments focus on infrastructural growth of India, however, it has to be seen if small plyaers like Suryachakra can really take advantage of this. The foray into power trading and Bio-diesel sector are a positive but the company's ability to succeed in these ventures is yet to be tested and proved. The IPO is rated as average.


About the Company

• SPCL is part of the Suryachakra Group and is headed by Sh. P.V Rao



• The company's vision is to be a frontrunner in power trading by developing a vibrant power market and striving to correct market distortions and to improve the commercial viability and supply power at competitive rates.



• The company is actively engaged in the generation of power. The company had set up 20 MW power plant in remote area near Port Blair, in Andaman Islands at a cost of Rs.850 millions and dedicated to the Nation. The plant is in operation for the past couple of years. It has already notched up an annual turnover of RS.800 millions.



• The Company focusing on entry into Urban infrastructure development activities and
  also had signed MOU with Zecon Engineering Berhad, Malaysia.



• The Company has been granted Power Trading license by Central Electricity Regulatory
  Authority for carrying out inter state sale (trade) of power.

Alert Areas

• The company’s group companies viz. Cocanada Fisheries Ltd. and Kalyan Marine and Agro Products Ltd were delisted due to non-compliance with Listing Agreement.



• The Company relies on a single customer for all of its income. Under the PPA, the Company is required to sell the entire power available for sale generated by the power plant to Electricity Department of A & N Administration



• Crisil has assigned a CRISIL IPO grade “2/5” (pronounced “two on five”) to the proposed initial public offer of Suryachakra Power Corporation Ltd (SPCL). This grade indicates that the fundamentals of the issue are below average relative to other listed equity securities in India.

Object of the Issue

To invest in Equity of MSM Energy Limited a wholly owned subsidiary, for setting up of two
10MW bio-mass based power plants in Parbhani and Amravati districts of Maharashtra.


Valuations

• For the Year ended March'07, total Income stood at 95 Crores while net profit stood at 1.72 Crores. Topline grew by 9.4 % while profits grew by 56%.



• The Consolidated average EPS works out to be 0.34. At the higher band of the offer price , the issue comes at a P/E of 58.82 Average industry P/E is 18.2 !!



• Return on Networth is 2.34 %



• Competitors like Neyveli Lignite is qouting at PE of 23 and has RONW of 7.7 %

Issue Opens : 25-06-2007

Issue Closes : 29-06-2007

Registrar : Karvy

IPO Allotment Status of Suryachakra

Company Website