Mundra Port - IPO Prospects

MPSEZ - Apply for 3 yrs time frame !

Issue Date :Nov 1- Nov 7
Issue Price :400 Rs - 440 Rs
Min. Order Quantity :15 Shares
Grade :Good
Recommendation :Subscribe


Mundra Port and Special Economic Zone, developer and operator of the Mundra Port, one of the leading non-captive private sector ports in India based on volume of cargo during fiscal 2007 is open for subscription with its initial public offering (IPO) of 40,250,000 equity shares of Rs 10 each for cash, at a price to be decided through a 100% book building process.

Investment summary

1. Port located at strategic natural location.
2. Well positioned to cater northern interiors of India.
3. Access to major modes of transport.
4. 15,665 acres of land bank with infrastructure in place to develop a port.
5. Fiscal advantages of a developing a SEZ.

Risks and concerns

1. Highly regulated sector.
2. Huge capital investment and long gestation projects.
3. Major revenue stream through few clients.

Strong volume growth to drive earnings growth

MPSEZL, a multi product SEZ, is well positioned to serve northern regions of landlocked India. With approximately 50% of the country’s commodity trade arising from the region, MPSEZL is well poised to garner robust growth. At the price band of Rs400-440 the stock would be trading at PE of 85.1x - 93.6x at its FY07 post issue diluted EPS of Rs4.8.

Over the last three years, the company registered a CAGR of 51.2% in its topline. We expect the company to maintain the growth rate and operating margins in future. We recommend to Subscribe the issue

Recommendation

Mundra Port and SEZ is the developer and operator of the Mundra Port, one of the leading non-captive private sector ports in India based on volume of cargo during fiscal 2007. MPSEZ is one of the first portbased multi-product SEZs in India. Also its locational advantage with a presence in the northwest coast of India and its connectivity by rail, road and pipeline to the transportation network of India would make the product delivery reasonable and efficient.

Also the company has a huge land bank for development following its mergers with ACL, MSEZ and APL which would lead to higher volumes of cargo in the port and various growth opportunities for the company. On the valuations side the company seems to be reasonably priced due to the lack of listed peers of the company. We recommend our investors to Subscribe to the issue