20 Microns is entering the capital market on 8th September 08, with a public issue of 43.51 lakh equity shares of Rs.10 each, in the band of Rs.50 to 55 per share. Of this, fresh issue is of 16.75 lakh shares, while offer for sale is of 26.76 lakh shares.
The company is into mining and mineral business with its plants located at five places in
Since the fresh issue is of 16.75 lakh shares only, even at the upper band of R.55, it would be able to mobilize Rs.9.20 crores only. This would be used to finance the ongoing expansion at five places, estimated to have an outlay of Rs.19.20 crores, including issue expenses and general corporate purposes. Rs.10 crores is being mobilized as a term loan from IDBI.
Financial health of the company as at 31.03-08 has not been very healthy. Inspite of gross block of Rs.76 crores as at
Ashapura Minechem, a Rs.1,500 crore company with tiny equity base of Rs.16 crores is ruling at a PE of close to 7. There are many such mining companies ruling at a PE multiple of 5 to 8 times, though they may not be strictly comparable, product-wise with the company.
Present issue, even if considered at the lower band of Rs.50, is being made at a PE ratio in double digit, which is definitely very high. The company would largely be falling in small cap category, for which perception is very low.
In view of this, investment is not advised in the issue at any levels.