Indian IPOs
>> Manaksia
Manaksia Ltd. IPO Analysis
17 December 2007
Source: www.keynoteindia.net
Keynote Capitals set "Subscribe with a long term view" recommendation on Manaksia IPO.
Manaksia Ltd. IPO details:
Price Band: Rs. 140 - 160 per share
Issue open between: December 17 - 19, 2007
Book Running Lead Managers: ICICI Securities
To List on: NSE and BSE
Market Cap post-listing: Rs. 11.1 billion or $282 million (based on the cap price)
Highlights:
Manaksia Ltd. is a multi-product company with a product portfolio that includes value-added metal products, metal packaging, mosquito coils and engineering.
Manaksia has a wide footprint, with subsidiaries in India, UAE, Nigeria and Ghana. We view the geographic footprint, in India and in Nigeria, as a positive. Nigeria, which offers benefits like low raw material prices and fiscal incentives, accounts for as much as 45% of total revenues.
Its operations are spread across 15 manufacturing units in India and 3 international units in Africa, thereby exploiting the location advantages of raw material procurement, fiscal incentives, proximity to customer resulting in reduction in logistic costs and delivery time.
Manaksia has successfully been able to integrate certain parts of its operations across a number of products. It has reduced third party dependence for procuring raw materials, leading to cost reductions and better product quality.
In FY07, metal products constituted 72.5% of aggregate revenues. Going forward, we expect the dominance of metal products to continue, as it further expands its capacity out of the IPO proceeds.
It plans to achieve vertical integration by setting up a steel cold rolling plant of 50,000tpa at Haldia, West Bengal, expected to be completed by December '07. This will provide raw material for its plants for galvanized operations located at Bankura and Nigeria.
Production of mosquito coils lacks synergies with the core business of metal products. Even the core business has an erratic track record of revenue growth.
The IPO is priced at 10.3x FY08E and 8.0x FY09E earnings and EV/EBITDA of 7.6x and 5.8x for FY08E and FY09E respectively. Though the valuation appears to be at a discount to peers, we believe the discount is justified, as peers Bhushan Steel and JSW Steel both have captive power plants.
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