SVEC Constructions has entered the capital market on 4th February, 2008 with a public issue of 40 lakh equity shares of Rs.10 each, in the band of Rs.85 to Rs.95 per share. Now the price band has been revised to Rs 80 to Rs 90 per share and the issue is now closing on 13.2.08.
One more construction and contracting issue, which is from a small company, vying to grow big. The company has been growing at 50%, in the last couple of years, with PAT margin of about 5%. For FY 07, the topline of the company was at Rs.150 crores, with PAT of Rs.7.53 crores, resulting in an EPS of Rs.6.30, on equity of Rs.11.92 crores.
For 6 months ending September 07, topline was at Rs.65 crores, with PAT of Rs.3.40 crores. Though second half of all the construction companies are better, still, topline beyond Rs.200 crores, cannot be expected of the company, for FY 08. Orders on hand, with the company, as at 30-11-07 are of Rs.522 crores, which would get executed in the next 2 year's, considering a growth of 35% to 40%. This kind of growth is nothing out of the ordinary, being posted by other players in the sector.
Post IPO, equity of the company, would rise to Rs.15.92 crores, which will be quite high, when compared to existing listed players. FY 08 EPS would remain below Rs.8 even on pre-IPO equity and would be around Rs.6, on post issue. This translates into a PE multiple of about 16 times at the upper band and at about 14 times on the lower band of Rs.85. There are many stocks available with better topline and better profit margins, at a PE multiple of about 10 times.
Even at the reduced price band, it is advisable to give a pass to the issue and go for better ideas available in the secondary market.