MAYTAS INFRA
Maytas Infra has filed it DRHP with SEBI on 04-05-07 to come out with a public issue of 88.50 lakh equity shares of Rs.10 each. The BRLM are DSP and JM while Kotak is Co-BRLM.
The fund requirement of the company is mainly to make investments in associate companies of about Rs.265 crores. Principle investment of Rs.166.44 crores is earmarked for 50% investment in KVK Nilachal Power, a 300 MW coal based power plant in Orissa, Rs.30.97 crores in Bangalore Elevated Tollway for 33%, Rs.34.25 crores in S V Power for 50% stake a project of 56 MW coal washery reject based power plant and Rs.33.29 crores for purchase of construction equipments.
If one makes a reverse calculation, issue price per share works out to Rs.300, which definitely looks stretched. During 9 months ending 31-12-2006, the total income of the company was placed at Rs.312 crores, PBT of Rs.39.42 crores and PAT of Rs.29.09 crores on equity base of Rs.50 crores, resulting in an annualised EPS of Rs.7.75 per share. Even based on earning method, valuation is quite stretched, if presumed at Rs.300 per share.
The company is basically an infrastructure developer and construction company having order book of Rs.2,500 as at 31-12-06. The net worth of the company on 31-12-06 was at Rs.245.32 crores with NAV per share of Rs.49.06. The company had secured loan of Rs.197 crores and unsecured loan of Rs.158 crore as on that date, thus having a debt equity ratio of 1.45:1. Quite a stretched balance sheet too!
The business model of the company is largely with minority stakes in long gestation project which are being created with huge debt equity ratio of as high as 3:1. Due to below 50% stake being held by the company in such project, the same also would not get consolidated in the company's financials. Due to this, investments would be treated as inter-corporate investments, which are valued by the market to the extent of 40% to 50% of its NAV.
The stakes likely to be acquired by the company in the various projects are as under:--
1) 33.33% in Brindavan Infra Co.
2) 30% in Western U P Tollway
3) 33.33% in Bangalore Elevated Tollway Road'
4) 50% in Pondicherry Tindivanam Road
5) 19.5% in Gautami Power
6) 33% in Himachal Sorang Power
7) 25.5% in Machipatannam Port
To have a look at the financials of one of associate company, let us look into KVK Nilachal Power, which is setting up a 300 MW coal based power plant in Orissa with project cost of Rs.1,368 crores, to be financed by equity of Rs.342 crores and debt of Rs.1,026 crores with a debt equity ratio of 3 : 1. For 50% stake, the company had to invest Rs.171 crores, of which Rs.166.44 crores is being mobilized from the proposed issue while Rs.4.56 crores has already been invested from internal accruals of the company.
S V Power is setting up a 56 MW coal washery reject based power plant and 2.5 million TPA coal washery at Korba, Chattisgarh with project cost of Rs.277 crores being financed with equity of Rs.69 crores and term loan of Rs.208 crores giving a debt equity ratio in excess of 3:1. The 50% stake would cost Rs.34.50 crores, which is being mobilized from the proposed issue.
Bangalore Elevated Tollway - its an elevated highway project on Bangalore Hosur road with concession period of 20 years, starting from 25-07-06 to 25-07-2026 including 24 months of construction. The cost of project is Rs.775.72 crores with initial grant of Rs.16 crores from the government. The same is being financed with equity of Rs.175.72 crores and term loan of Rs.600 crores, a debt equity ratio of 3.4:1.
All these projects would also get added into the investments lists of the company. Since the company would also be extending guarantee for all the debts availed by these companies, on joint and several basis, the contingent liability of the company would be huge and surpassing its net worth many times.
The business model of the company is not attractive enough and huge investments would reap fruits after a long gestation. Just 15% equity is being diluted to mobilize over Rs.270 crores, which is higher than the net worth of the company as at 31-03-07. No value accretion has been witnessed on the existing assets of the company. Due to this, even valuation would not justify, such a steep pricing of the issue. The company belongs to Satyam promoters' family and the name of the company has been derived by writing "Satyam" in the reverse way.