RPP Infra Projects IPO : Analysis

by khalid on 21/11/2010 · 3 comments

RPP Infra Projects Limited is entering into primary market with an Initial Public Offer (IPO) of 6,500,000 Equity Shares of Rs 10 each. The IPO is opening on 18th Nov 2010 and the shares will be available for subscription up to 22nd Nov 2010. The price band for the issue has been fixed at Rs. 68 – Rs. 75 Per Equity Share. RPP Infra Projects Limited is in the business of infrastructure development such as Highways, Roads and Bridges. Company is also involve in civil work like SEZ Development, Water Management projects, Irrigation and Power Projects.

The objects of the issue are to fund the capital expenditure, provide for working capital margins, to fund an SPV for proposed BOT projects and for general corporate purposes.

Company Financials:-
(Rs in Crores)

For the year ended 31-Mar-10For the year ended 31-Mar-09For the year ended 31-Mar-08For the year ended 31-Mar-07
Total Income146.88101.2272.1344.67
Profit After Tax (PAT)8.264.122.051.86

Risk Factors:-
1. Rating agency FITCH has given IPO grade 2 which shows a Below Average Fundamentals.
2. The company plans to enter into BOT/BOOT segment. This segment is highly competitive and as company has no past experience of executing BOT projects, it would be very difficult to get in.
3. In the past, the directors of the company have attracted disqualification under Sec 274 (1) of the Companies Act.
4.The objects for which the funds are intended to be raised have not been appraised by any bank or financial institution.

Valuation and Recommendation :-
At the price band of Rs 68-75, the company is demanding a valuation of 18x on its FY11 earnings, on the post issue expanded capital of Rs 22.60 crores, which is expensive, for a mid sized company. Several other companies like J Kumar Infraprojects Ltd. with market cap. of Rs 652.05 crores and Pratibha Industries Ltd. with market cap. of Rs 706.96 crores are available at much cheaper valuation in the same segment. BOT segment is highly competitive and for a new entrant it will take a long time to stablish itself. So if you are looking listing gain then AVOID subscription.

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{ 3 comments… read them below or add one }

Atul November 22, 2010

What should be the strategy on this one? As far as I understand, issue appears to be expensive.

Will we get the refund before Punjab and Sind Bank IPO?

Reply

khalid November 26, 2010

Hi Atul,

You are right, IPO is expensive and one should AVOID.

Reply

SOMESH KUMAR December 4, 2010

RPP Infra IPO: I have not got refund for rs. 6000/- through ECS till date on 04-12-2010. My application form no. is 14873436. Please help me.

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