Cords Cable Industries is entering the capital market on
The company is presently manufacturing Power Cables up to 1.1 KV and is in the process of expanding its capacity in two stages. The first expansion of Rs.13.20 crores would get completed by January 2008, while the second expansion of about Rs.65 crores is under implementation, for which, funds are being mobilized. Strangely, the existing capacity and capacity under expansion is not revealed anywhere by the company in its RHP. Instead, it has laid more emphasis on its existing land area of 45,000 sq. ft, which is being increased to 92,000 sq.ft. Is it a construction and realty Company or a cable manufacturing company?
The fortunes of power cable manufacturers have changed in the last two years and same is the case here. Till FY 04, the bottomline was less than Rs.10 lakh on a topline of Rs.20 crores. For FY 07, total income of the company was at Rs.92 crores with PBT of Rs.10.65 crores and PAT of Rs.7.00 crores on equity of Rs.6.60 crores, resulting in an EPS of Rs.10.60. However, the present equity of the company stands at Rs.8.34 crores which would rise to Rs.11.93 crores.
Though, the company, in the first six months of the current year has shown some improvement in its financial performance, it pales in comparison with its peers. The topline for first half of FY' 08 was Rs.67 crores with PBT of Rs.8.19 crores and PAT of Rs.5.35 crores.
There are many companies available in the secondary market which have better performances than that of Cords Cable and are ruling, at a PE multiple of 10 or less. For example, Torrent Cables having an equity base of Rs.7.50 crores with promoters stake of 63%, had a sales of Rs.200 crores for FY 07 with PAT of Rs.20 crores, resulting in an EPS of Rs.26. For 9 months ending 31-12-07, the sales was placed at Rs.160 crores with PAT of Rs.22.50 crores resulting into an EPS of Rs.30. Hence FY 08, EPS is likely to cross Rs.40. The share is now ruling at Rs.350, discounting it by less than 9 times.
This company is likely to post an EPS of close to Rs.10 for FY 08, on post IPO equity of Rs.11.43 crores, which results in a discounting of 13.5 times at the upper band. Hence, it is advised to give this IPO a pass as there are better options available in the secondary market.