BARAK VALLEY CEMENTS LIMITED - IPO prospects

BVCL- Avoid & Look out for better options!!!

Issue Date :Oct 29- Nov 1
Issue Price :37 Rs - 42 Rs
Min. Order Quantity :150 Shares
Grade :Average
Recommendation :Skip

Company Info

Barak Valley Cements is entering the capital market on 29th October, 07 with a public issue of 56.60 lakh equity shares of Rs.10 each in the band of Rs.37 to Rs.42 per share. At the upper band of Rs.42, issue size would be close to Rs.24 crores

The company, presently has cement manufacturing capacity of 760 TPD, of which 460 TPD is manufactured by the company and 300 TPD by its wholly owned subsidiary, Cement International Ltd. Inspite of having such a low level of activity, the company has three wholly owned subsidiaries viz. Badarpur Energy, setting up a 6 MW bio mass based power plant, Cement International is making 300 TPD of cement and Meghalaya Minerals & Mines supplying limestone for cement making.

Valuation

EPS may hover below Rs.10, as paid-up equity is also increasing by about 25%. Presently, many larger cement companies are ruling at a PE multiple of 5 to 6, and this issue, at upper band at Rs.42 is made at a PER of close to 5. Also, low capacity and high equity base would always be a dampner for the share price to rise.

Keeping these issues in mind, BVCL is fairly priced for this mediocre cement company which is posting profits largely due to various exemptions and benefits. Go for secondary market plays, if you are too keen to hold a mini cement or a small size cement company.

Premium on Listing : Will touch 100 in 5-6 months (based on the rally in Cement sector)