Puravankara Projects has got an extremely poor response to its IPO. There was no response from HNI and Retail Category till 3 pm on Friday. Even QIB withdrew their applications, which is evident from the poor IPO subscription. It was subscribed 38% till 2 pm which got reduced to 37% till 3 pm on Friday.
Due to such a pathetic response, management and BRLM were forced to lower its band to Rs.400 - Rs.450 per share and have also extended closure of issue to 8th August 07. Management attributes the poor response to issue, to volatile market conditions. Markets are definitely volatile but have not turned so negative that it would compel a company to reduce its band by almost 20%. So why not admit that it was stiff pricing, which was the cause of poor response?
The issue was analysed in great length by us, wherein mode of acquiring 43.56 million sq. ft. land was questioned. It was like building castles in the air.
Now let's have a look at the company's valuation at both the bands. The equity of the company is 21.35 crore shares of Rs.5 each for Rs.106.74 crores. At Rs.400, the market capitalization works out at Rs.8,540 crores. In view of company having 102.25 million sq. ft. developable area, the valuation is still stiff and aggressive. Parsavanath Developers having developable area in excess of 150 million sq. ft. plus SEZ over and above that, have market capitalization of Rs.6,000 crores, that too having its land bank in north, especially in NCR region. So, if issue is still aggressive at the lower revised band of Rs.400 per share, obviously it is very expensive at Rs.450, which is the upper end of revised band. Maybe, the company has got indication of this band from its prospective investors.
It is likely that price may get discovered at Rs.400, at the lower band and still we may still find it stiff and aggressive.