Category: IPO/FPO ANALYSIS

Opportunities provided in IPO and FPO situations are analysed

Central Public Sector Enterprises ETF – Invest

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CPSE ETF NFO Update 04th April

  • The CPSE ETF offering was successful and oversubscribed as applications were for Rs 4,400 crore when the offer was limited to Rs 3,000 cr.
  • The ETF units were allocated to subscribers at a price of Rs 17.45.
  • NFO investors got allotment by a formula – investor who applied for more than 5000 units got a guaranteed allotment worth 5,000 units. The balance units were allotted to all applicants on a proportionate basis, as per reports.
  • Retail investors who applied for Rs 2 lakhs worth got refunded about Rs 45,700 and got about 8,800 units.
  • Trading of this ETF started on the exchange today and it appreciated by 10.9%.
  • So this Retail investor has gained Rs 16,700 from this NFO purchase already. This is a great start for investors !!
  • As mentioned in my initial report, investors need to hold on to this ETF for 1 year to gain the Loyalty units. In addition, holding for over one year allows for dividend benefits as well as taxation gains.

Good luck and happy investing.

JainMatrix Investments's avatarJainMatrix Investments

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  • Report Date 21-Mar-2014
  • NFO Offer Period – 19-21st March 2014
  • Mutual Fund Nature – Large Cap PSUs ETF
  • Will launch at Rs 10 NAV
  • Advice: Buy

Here is a note on the Central Public Sector Enterprises – Exchange Traded Scheme – NFO.

Offer Description

  • Goldman Sachs is launching the CPSE ETF through a New Fund Offer (NFO)
  • CPSE Index will facilitate GoI’s (Govt of India) initiative to dis-invest some of its stake in CPSEs through the ETF route.
  • Ten leading PSUs’ will be included in this ETF at offer stage
  • Typically these are fairly well known high dividend, low capital gains but asset rich companies
  • Already in the first 3 days of Offer, the fund has collected Rs 2400 crore of the Rs 3000 cr targets.
  • Analysis of these ten PSUs as part of this ETF

CPSE analysis, JainMatrix Investments CPSE analysis, JainMatrix Investments

Note here: 1) Coal India price is taken from…

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Central Public Sector Enterprises ETF – Invest

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  • Report Date 21-Mar-2014
  • NFO Offer Period – 19-21st March 2014
  • Mutual Fund Nature – Large Cap PSUs ETF
  • Will launch at Rs 10 NAV
  • Advice: Buy

Here is a note on the Central Public Sector Enterprises – Exchange Traded Scheme – NFO.

Offer Description

  • Goldman Sachs is launching the CPSE ETF through a New Fund Offer (NFO)
  • CPSE Index will facilitate GoI’s (Govt of India) initiative to dis-invest some of its stake in CPSEs through the ETF route.
  • Ten leading PSUs’ will be included in this ETF at offer stage
  • Typically these are fairly well known high dividend, low capital gains but asset rich companies
  • Already in the first 3 days of Offer, the fund has collected Rs 2400 crore of the Rs 3000 cr targets.
  • Analysis of these ten PSUs as part of this ETF
CPSE analysis, JainMatrix Investments

CPSE analysis, JainMatrix Investments

Note here: 1) Coal India price is taken from the IPO price to today 2) EIL FPO report by JainMatrix Investments is available at LINK

Pros

  • The ETFs have a lower management charge as stock selection and portfolio changes are automatic. The expense ratio is 0.49% annualized
  • Retail investor ie. who invest upto Rs 2 lakh get special Loyalty Units of 6.67% for holding this ETF for 1 year
  • The fund will offer 5% discount to the NFO subscribers
  • Average dividend yield for these stocks is 3.57% calculated as of today.
  • See figure above, the average share price appreciation over last 5 years is 9.4% for the entire basket. This of course can vary widely from year to year.
  • These together appear to offer the Retail investor about 24% returns in the first year assuming average appreciation of the share prices.
  • Many of these firms own wonderful assets, the family silver of the GoI. These firms also enjoy monopoly status in their sectors. 

Cons

  • However it is sad to see how this family silver has been eroding in value over the years.
  • The constraints within which these PSUs work makes it difficult to grow enterprise value and profits.
  • In Oil and Gas sector, the largest risk to corporate performance is ad hoc Subsidy systems and highly taxed products.
  • The Dividend yield in above table is for the recent year. This may look better than previous years due to the GoI demands for dividends to meet budgeted finance targets.
  • Most of these stocks are asset heavy and resource rich firms. Their performance depends upon revenue growth, which has not been high and varied widely in recent years.
  • Many of these firms depend on govt policies and monopoly situations to grow.
  • This fund is Oil and Gas heavy with 59-60% weightage. If one extends the description to Energy/Coal/ Power/ Oil and Gas and related financing, it increases to 92%. These sectors are essential to the economy, but are typically constrained and not shareholder friendly sectors.
  • The general elections of 2014 may have a big bearing on the share prices of these firms. Typical market risks apply to such investments.
  • The government as an owner/promoter in modern times may be driven by political and financial constraints rather than the original ‘Nation building’ objectives.
  • If GoI proceeds on dismantling the Administered Price Mechanism in Oil & Gas, and allows Coal India, ONGC, etc to truly work freely without govt constraints and subsidy systems, they are incredibly valuable firms and this fund can skyrocket. However this has not happened in the last 10 years.

Overall Opinion

  • This is a low risk, high dividend value oriented ETF offering.
  • There is a fair commitment for Retail gains, pegged by JainMatrix Investments at 24% above for the first year. Market performance can affect this number in either direction.
  • After 1 year investor will need to review the performance of the fund for continued ownership and their delivery against objectives.
  • The low risk Retail investor may invest in this Fund for the first year.

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Disclaimer

This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same. Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from an independent expert/advisor. Either JM or its affiliates or its directors or its employees or its representatives or its clients or their relatives may have position(s), make market, act as principal or engage in transactions of securities of companies referred to in this report and they may have used the research material prior to publication. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com

Engineers India FPO – Buy

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FPO Update 27th Feb

  • The FPO sailed through finally with a subscription of 2.83 times the offering.
  • This was good enough for the firm to price the FPO issued shares at 150. For Retail post discount, it is Rs 144.
  • As a result a Retail investor who had applied for the maximum number of shares still got only 36% of applied number.
  • The shares were deposited into demat accounts over 21-24th. On 25th Tuesday we saw the share price dip to a low of 145.5, and 4% by price by EoD. As expected volumes went up, and a lot of FPO allotted shares changed hands.
  • The next day, the share recovered by almost 3% to 151.4.
  • My reading is that there is demand for the share and it should rise steadily from here.
  • The Q4 results for EIL may be interesting. Typically the firm has a good last quarter as most of the clients are also PSUs. FY13 was an exception, and it was a bad year for EIL. This should change this year.

Good luck and happy investing.

JainMatrix Investments's avatarJainMatrix Investments

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  • Report Date 11-Feb-2013
  • CMP: Rs 151
  • Mid Cap – with Mkt Cap of 5,113 crores
  • Pricing: Rs 145-150 range, Retail gets an additional Rs 6 discount
  • Issue Period: 6-12 Feb 2014
  • Advice: Buy

Here is a note on the Engineers India Ltd  FPO (EIL).

Introduction

  • EIL is a PSU engaged in engineering consultancy and turnkey implementation of petrochemical projects.
  • Its turnover in FY13 was 2,529 crores, with profits at 632 cr. Market Cap today is 5,113 cr, at CMP 151.
  • It has 2,890 employees. The focus was Oil and Gas projects, but EIL is diversifying into new sectors like Fertilizer and LNG, Non-ferrous metallurgy, Infrastructure and Nuclear and solar energy.
  • The Delhi based firm is expanding from mostly Indian projects, to execution in MENA (middle east North Africa) and South East Asia. Additionally, offices in London, Milan and Shanghai are for international procurement and marketing.
  • The divestment of 10% of EIL…

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Engineers India FPO – Buy

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  • Report Date 11-Feb-2013
  • CMP: Rs 151
  • Mid Cap – with Mkt Cap of 5,113 crores
  • Pricing: Rs 145-150 range, Retail gets an additional Rs 6 discount
  • Issue Period: 6-12 Feb 2014
  • Advice: Buy

Here is a note on the Engineers India Ltd  FPO (EIL).

Introduction

  • EIL is a PSU engaged in engineering consultancy and turnkey implementation of petrochemical projects.
  • Its turnover in FY13 was 2,529 crores, with profits at 632 cr. Market Cap today is 5,113 cr, at CMP 151.
  • It has 2,890 employees. The focus was Oil and Gas projects, but EIL is diversifying into new sectors like Fertilizer and LNG, Non-ferrous metallurgy, Infrastructure and Nuclear and solar energy.
  • The Delhi based firm is expanding from mostly Indian projects, to execution in MENA (middle east North Africa) and South East Asia. Additionally, offices in London, Milan and Shanghai are for international procurement and marketing.
  • The divestment of 10% of EIL shares is going on through the FPO process.

 Price Snapshot

EIL Price Profile, JainMatrix Investments

EIL Price Profile, JainMatrix Investments, Click to enlarge any image

  • Investors in EIL over the last 5 years have seen an 11% appreciation in the share price. However, the high of Rs 538 occurred in 2010 when a share split and bonus was announced. Thereafter the share has fallen steadily.
  • The dividend at 120% on a FV of 5, provides a dividend yield of 4%.
  • EIL is today available at 2009 price levels.

Financials

EIL Financials, JainMatrix Investments

EIL Financials, JainMatrix Investments

  • The Revenues, EBITDA and Profits have grown at 25%, 17% and 17% over the last 5 years. But there has been a  fall in the recent year, of FY13.
  • We can see that FY12 was a peak year with a number of projects completed here. Business appears to be falling from here. (The FY14 number is only for first 3 quarters).
EIL Business Segments, JainMatrix Investments

EIL Business Segments, JainMatrix Investments

  • Business revenues consists of Consulting and Turnkey segments. The former is steady while the latter is cyclical and dependent upon the projects completed.
  • Margins are steady and high for Consulting, but lower and variable for turnkey, dependent on the execution.
EIL Cash Flow, JainMatrix Investments

EIL Cash Flow, JainMatrix Investments

  • Cash flow has been positive but lumpy and variable.
  • Current P/E is 8.05 times, the lowest in the last 5 years.
  • Debt is zero, and cash on hand is 1848 cr (FY13). This translates to Rs 55 per share of cash.
  • A key ratio is Orders Booked to Revenues Billed. A view of this shows that the ratio is at the best level for the last 4 year period.
  • ROCE and RONW are high at 39% and 28% respectively. This is a positive indicator.
EIL Booked to Bill Ratio, JainMatrix Investments

EIL Booked to Bill Ratio, JainMatrix Investments

FPO Offer and Subscription Status

  • The IPO price band is 145-150 per share; Issue period for Retail is Feb 6-12, 2014.
  • The government holding will fall from 80% to 70%. It is selling this to meet its FY14 divestment targets.
  • As per data available till EoD Feb 10th, the offer is already 1.44 times oversubscribed. The breakup is QIB 2.33 times, Non Institutional investors 0.01 times and Retail 0.84 times.
  • P/E at upper end for the Retail offer is 7.7 times FY13.  

Overall Opinion

  • The Oil and Gas sector of India is still PSU dominated. EIL is a preferred vendor in this segment.
  • EIL is also growing rapidly in new sectors and geographies.
  • Our view is that this sector will start to do well over the next 2-3 years and EIL will be an early gainer in this revival.
  • By all indicators, in the next 2 days ie 11-12 Feb, the offer should be well oversubscribed.
  • Based on all this, EIL in this FPO is a good contrarian, value buy.
  • Investors need to have a longer 2-3 year perspective.  

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Disclaimer

This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same. Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from an independent expert/advisor. Either JM or its affiliates or its directors or its employees or its representatives or its clients or their relatives may have position(s), make market, act as principal or engage in transactions of securities of companies referred to in this report and they may have used the research material prior to publication. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com

Power Grid FPO 2013 – Apply

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Update Jan 01 2014

The PGCIL FPO and subsequent price action has so far rolled out in expected fashion.

  • Retail investors who followed the buy recommendation at FPO, and applied for the maximum shares at Cut-off would have received 1029 shares (after applying for 2250) at Rs 85.5 .
  • This translates to a gain of Rs 14,400 at todays CMP of 99.5.
  • A gain of 16.4% so far, in just a month of investing.

What should you do now?

The market and the share looks good so far, so hold on if you can for more gains.

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  • Visit the SUBSCRIBE page to find how you can get more. Click LINK
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Disclaimer:

These reports and documents have been prepared by JainMatrix Investments Ltd. They are not to be copied, reused or made available to others without prior permission of JainMatrix Investments. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com

Also see: https://jainmatrix.wordpress.com/disclaimer/

JainMatrix Investments's avatarJainMatrix Investments

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FPO Update 11th Dec

  • The FPO closed finally with 6.74 times subscription. Of this, Retail was 2.17 X, QIB 9.09 X and HNI 9.7 X.
  • So Retail applicants should get 40-60% of their applied shares.
  • The pricing declared in this FPO was Rs 90, at the upper end of the range. Thus the FPO has been a success, and has raised about Rs 7000 crores.
  • This success indicates a mood change in the market. Certainly many firms will now approach the market with IPO/FPO offerings. Also its obvious that institutions and HNIs are participating/ investing more than Retail.
  • Time for the rise of Indian Retail?

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FPO Analysis

  • Published on: Dec 6, 2013 @ 11:39
  • Pricing: Rs 85-90 range
  • Issue Period:  3-6 Dec 2013 
  • Retail gets an additional 5% discount

Positives:

1) a PSU semi monopoly for power transmission
2) guaranteed returns on assets; predictable income and cash flow
3) over 15%…

View original post 158 more words

Power Grid FPO 2013 – Apply

1 Comment

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FPO Update 11th Dec

  • The FPO closed finally with 6.74 times subscription. Of this, Retail was 2.17 X, QIB 9.09 X and HNI 9.7 X.
  • So Retail applicants should get 40-60% of their applied shares.
  • The pricing declared in this FPO was Rs 90, at the upper end of the range. Thus the FPO has been a success, and has raised about Rs 7000 crores.
  • This success indicates a mood change in the market. Certainly many firms will now approach the market with IPO/FPO offerings. Also its obvious that institutions and HNIs are participating/ investing more than Retail.
  • Time for the rise of Indian Retail?

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FPO Analysis

  • Published on: Dec 6, 2013 @ 11:39
  • Pricing: Rs 85-90 range
  • Issue Period:  3-6 Dec 2013 
  • Retail gets an additional 5% discount

Positives:

1) a PSU semi monopoly for power transmission
2) guaranteed returns on assets; predictable income and cash flow
3) over 15% year to date fall in share price makes this share a better value purchase today
4) plays a critical nation building role by developing the power trans capacity and control.
5) by yesterday FPO was already 4.8 times oversubscribed with qib portion 9 times oversubscribed. Retail is likely to get a good fraction of his application in the allotment.
6) retail gets 5% discount on price.

Negatives:

1) very high debt and D/E is over 2.4
2) government dominated sector with sale prices, returns and most costs all controlled. So out performance is difficult.
3) massive asset play. Essentially pgcil gets a return on massive transmission grid assets.
4) likely to continue to approach market for FPO every 2-3 years, resulting in earnings dilution, in order to continue current mission.

Opinion:

  • Current FPO is a good 12 months investment with a 20% return target.
  • Not recommended for long term > 2 year holding.
  • Apply at cut off.

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CARE IPO: They do care about shareholders – Invest

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IPO follow up on 12th Dec 2012

  • The CARE IPO closed on Dec 11th with an amazing last day leap
  • Subscription jumped from 2.25 times on 10th EOD to 41 times on 11th
  • Institutional subscription was 46 times; Non Institutional – Corporates + HNI was 111 times, while Retail was 6.18 times. The chances of Retail getting an allotment are higher, as well as the proportion of shares he will get will also be higher than other categories
  • On a personal note – my expectation of 10-15 times subscription was exceeded. I am happy that my opinion was by and large the market view, and I erred only due to conservatism :-)
  • The market is like a slowly awaking ‘Kumbhakaran’ at this stage!!

Original Report Published on: Dec 10, 2012 @ 19:23

  • Date Dec 10, 2012
  • Industry – Credit Ratings, and Mid Cap share – 2,200 cr. mkt cap
  • Price range: Rs. 700-750 and IPO Period: 7-11 Dec 2012

I have to confess, I did not get time to research CARE IPO until today. I got a letter today that goes:

On Mon, Dec 10, 2012 at 5:57 PM, SK wrote:

Hi Punit, Can I go ahead and take CARE IPO when compare with the Upcoming IPO’s . Waiting for your quick response.. thanks in advance. Regards, SK

So I dived into the reports, did some comparisons, and here’s my response.

Dear SK,

CARE IPO looks excellent. Here’s why:

  • The Indian ratings industry is dominated by CRISIL, CARE and ICRA, in that order by revenues. The other two are already listed.
  • PE valuation of CARE at 17.5 times at upper end is half that of CRISIL, and lower than ICRA (22.5 times).
  • CARE has the lowest cost base, employee cost is only 25% compared to almost 50% for ICRA and CRISIL as the back office is located in Ahmedabad.
  • ROCE is high and EBITDA margins are highest of the 3.
  • Cash on books is 370 crore, 17% of market cap. Debt free status.
  • Subscription data of today is that IPO is 2.25 times subscribed, as per NSE website.

Good IPO offering, that leaves a lot on the table for subscribers, but the signs are that it will be 10-15 times oversubscribed due to the last minute rush.

Go ahead and try your luck, use ABSA, and your funds will not even be tied up.

Regards, Punit Jain

 

JainMatrix Knowledge Base:

  • Bharti Infratel IPO – Aggressive offering of Passive Infrastructure – LINK
  • Bharti Airtel – This is a year of consolidation – LINK
  • Telecom – Auctions speak louder than words – LINK
  • TBZ: A Glittering IPO Offer – Invest  – LINK
  • MCX – 800 pound Gorilla of Commodities; Invest – LINK

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Disclaimer:

These reports and documents have been prepared by JainMatrix Investments Ltd. They are not to be copied, reused or made available to others without prior permission of JainMatrix Investments. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com Also see: https://jainmatrix.wordpress.com/disclaimer/