Price band: Rs 68-Rs 75
Issue opens: December 17, 2007
Issue closes: December 20, 2007.
IPO grade: 3/5 Average fundamentals.

Business
Indore based auto component manufacturer is engaged into manufacturing and selling of SG and CI castings used in commercial vehicles segment.

Financials
Income
FY2002-2003: Rs 13.86 crore
FY 2006-2007: Rs 34.63 crore
CAGR = 25%

Net profit
FY2002-2003: Rs 0.06 crore
FY 2006-2007: Rs 0.75 crore
CAGR = 85%

Six months ended September 30, 2007:
Income: Rs 16.70 crore
Net profit: Rs 0.75 crore

Objectives
Expansion manufacturing capacities from 6,600MT per annum to 27, 600 MT per annum
Set up one windmill, of 1.5MW power generation capacity for captive consumption.

Outlook
Eicher is biggest customer and the company heavily depends on Eicher.
New customers like Man Trucks will take time to develop.

Preferential allotment to promoters at Rs 10 in January 2006.

Chequered history: Company came out with a public offer in 1994. The projections at the time of IPO were never came on paper. The shares were listed only on OTCEI, which never worked smoothly. Company never tried to list itself on BSE or NSE. This is a counter where investor interest always placed on back seat. Even now the concerns on corporate governance remain. The company now is seeking listing on BSE only. Reason is easier compliance and nothing else.

P/E of 68 to 75 times its annualised earnings for H1 FY2006-2007 on fully diluted equity capital. Mind well the 6 months earnings are before any provision for tax. The six months earnings are equal to the 12 months earnings ended March 31, 2007. Investor hence should understand that the stock is almost 120 times it’s per share earnings, if we consider FY2006-2007 earnings.

Looking at the risks involved we recommend an avoid on this counter. Please note that the stock if falls below Rs 30, it becomes an attractive counter though risks on non-promoter investor interest prevail. The attractiveness grows, as Volvo is about to enter Eicher. Commercial vehicle market in India is expected to experience a glut in short term. However post FY09, the commercial vehicles may see a good growth. This may make the counter attractive in the long run as capacities are multiplied.

Article courtesy: umcapitalindia