ROMAN TARMET

Roman Tarmet is entering the capital market on 12th June 07 with an issue of 29 lakh equity shares of Rs.10 each in the band of Rs.150 to Rs.175 per share. The company is primarily engaged in construction of roads and has since then moved into improvement of runways. It took up work of bituminous overlay of the runways and implemented the same for Vadodara, Daman and Mumbai airports. The company also moved into upgradation of road, as also construction of container yard compound wall, site leveling, casting of RCC sleepers and laying tank foundation. All the works being undertaken by the company are unique in nature, more like a niche, which may give high margins but are not of repetitive nature. Due to this, company has not been able to specialize in any one particular area and consequently can be termed as the "Jack" in construction and contracting field. But it is precisely because of its niche that the margins of the company are better than that of its peers. For nine months ended 31-12-06, the company achieved a total income of Rs.84.65 crores, PBT of Rs.8.44 crores and PAT of Rs.8.15 crores on equity of Rs.8.06 crores, resulting into an annualized EPS of Rs.13.50. The company has now drawn a capex plan of Rs.41 crores, which is entirely met from the proposed issue. Of this, Rs.22.90 crores is estimated for capital equipment while Rs.18 crores for working capital requirements. The gross block of the company as at 31-12-06 was Rs.34.10 crores, which were created during the 20 years of its existence. So how come now this sudden requirement of Rs.23 crores? As at 31-12-06 the net current assets of the company were at Rs.43 crores. Working capital is the lifeline for any construction and contracting company. Hence, additional working capital of Rs.18 crores would boost the topline of the company by about Rs.50 crores. The company has stated Mr. R C Sinha as Chairman of the company on Page 7 of RHP while Page 66 of RHP does not specify him to be so. Generally, name of Chairman appears first in the list of Board of Directors but instead the company preferred to first state the name of their promoter and Managing Director - Mr. Jerry Verghese. Name of Mr. R C Sinha appears fourth in the list. Strange way of maintaining protocol in the company, isn't it? The share is being issued at a PE of 11 and 13 at the lower and upper band. However, there are many stocks available in the secondary market at a PE multiple of 10 - 12. Some of them are Gayatri Projects, MSK Projects, C&amp;C constructions and PBA Infrastructure. The company is of a mediocre kind and has not been able to grow despite its existence in the industry for the past 20 years. The investment may not be very rewarding as valuations are quite steep.

ROMAN TARMET

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