Ashoka Buildcon is entering the capital market on
Apart from this incomplete information, even some misleading or incorrect information is given in the RHP. On page 7 of RHP, it is stated that the Company believes that they currently operate one of the highest number of toll based BOT projects in
Apart from BOT projects, the company has its EPC or contracting division to construct roads for its BOT projects, as also for third parties, as also constructing industrial and institutional buildings. RMC and Bitumen Division and Toll Collection Contract Division, have either inhouse or insignificant contribution, in the consolidated financial performance of the company.
For FY10, on consolidated basis, the total income of the company was at Rs.1,116 crores with PAT at Rs. 76 crores. This translates into an EPS of Rs. 16.65 for the year, on equity base of Rs. 45.69 crores. Net worth of the company as at
The object of the issue is to largely repay the loan of the company and its subsidiaries, to the extent of Rs. 115 crores, working capital requirements of Rs. 45 crores and purchase of capital equipments of Rs. 14 crores. As the company had a debt of Rs. 1,122 crores, as at
Inspite of the company having its topline contributed by EPC by about Rs. 995 crores, with toll of just Rs.45 crores, the issue looks quite expensively priced, at a PE of 18 to 19.50 times and PBV of 2.34 to 2.55 times, (post IPO), at the lower and upper price band.
This needs to be compared with the financial performance of IL&FS Transportation a pure BOT road and infrastructure play. This company had a topline of Rs. 2,400 crores for FY10, on consolidated basis, while PAT was placed at Rs. 344 crores, resulting in an EPS of Rs. 17.75 and Rs. 20 on diluted basis. Share now ruling at 343 is ruling at a PE of 19.30 times, with book value at Rs. 86 per share, as at
Even JP Infra is much better road and infra company, which is implementing 165 km. Yamuna Expressway project from Noida to
Also, it is an unwritten law that there should be a gap of about 15% in IPO price and expected listing price of a share. So if, IL&FS, a better and bigger portfolio, with better parentage, is ruling at a PE of less than 19.50 times, how this company can dare to issue share in a PE of 18 to 19.50 times? On top of it, contracting or EPC companies, of this size are ruling at a PE of around 10 times. So, if we take an average of both, ideal PE of the company on bourses should be 14 times and issue should have been made at a PE of less than 12 times.
One can thus say that the issue is definitely aggressively priced and valuations look stretched even at the lower end of the price band. It is better to look for existing players by giving a pass to this issue.