Tecpro Systems’ IPO appears fairly priced
Moneylife Digital Team 23 September 2010

However, raw material price fluctuations could impact the company as it has not inked any agreements to insulate itself from cost escalations; it also needs to broaden its client base

Issue Details

Issue Date: 23rd September-28th September
Number of shares: 75,50,000 shares
Employees: 2,00,000 shares
Qualified Institutional Buyers (QIBs): Up to 60% (including 5% to mutual funds)
Non-institutional bidders: 10% 
Retail investors: 30%
Face value: Rs10 per share
Issue price: Rs340 to Rs355 per share
Issue size: Rs268 crore
Listing: BSE & NSE

Post-listing details

Pre-issue promoters' holding: 60%
Post-issue promoter and promoter group holding: 53%
EPS (FY10): Rs25.01
P/E Ratio: 13.59 (at the lower band) and 14.19 (at the upper band)
Highest P/E in the industry: 83.2
Lowest: 7.8
Industry composite: 31.7

Business

Incorporated in 1990, New Delhi-based Tecpro Systems Ltd is engaged in material handling, provides turnkey solutions in material handling, ash handling, balance of plant (BoP) and engineering, procurement & construction (EPC) contracts. The company designs, engineers, manufactures, sells, commissions and services a range of systems and equipment for the core infrastructure related sectors like power, steel, cement and other industries. The company is promoted by Ajay Kumar Bishnoi and Amul Gabrani who are entrepreneurs with around 25 years of experience in the material handling industry.

Strengths

  •  Project management expertise and established track record of project execution.
  • Strong in-house design and manufacturing capabilities.
     
  • Technical collaborations and alliances with international manufacturers.
     
  • Experienced management team.
     
  • Well-positioned to capitalise on the growth opportunities in the Indian power sector.
     
  • Strong order book: As on 31 March 2010 and 31 July 2010, its order book stood at Rs2,013.95 crore and Rs2,311.29 crore, respectively.


Concerns

  •  The company and its group firms are involved in legal proceedings involving Rs1,118 crore.
     
  • Changes in raw material prices like iron & steel, cement, bearings, castings, plumber blocks could disrupt operations as the company has not entered into any cost-escalation clauses.
     
  • It derives a major chunk of its revenue from a few customers. Payments from its top 10 customers constituted 68.39%, 65.70% and 66.72% of its income from operations for FY2010, 2009 and 2008, respectively.

Financial Snapshot

Analysts' take

Rating agency CRISIL has assigned an 'IPO Grade 4' to the issue indicating 'Above Average Fundamentals'. 

Objects of the Issue
To fund working capital requirements at Rs200 crore and general corporate purposes.

Valuations
Its competitors like BGR Energy Systems Ltd, Elecon Engineering Company Ltd, McNally Bharat Engineering Company Ltd, Sunil Hitech Engineers Ltd and TRF Ltd have an EPS of Rs27.9, Rs5.6, Rs11.2, Rs18, and Rs41.90 respectively.

They have a P/E of 29.1, 16.6, 25.3, 10.9 and 19.40 respectively. The issue is priced 34 times of its face value on the lower side and 35.5 times on the higher side. The issue price looks somewhat better than its peers. The issue consists of fresh issue of 62.50 lakh shares and offer for sale of 13 lakh equity shares. The issue shall constitute 14.96% of the post-offer share capital of company.

Comments
P C Chacko
1 decade ago
The history of the stock market during the last 5 decades shows that fresh pek always more than the previous peak Similarly bootom also always higher than the previous bottom The senses may cross 24000 by December 10 After that it may start sliding down
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