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Indian IPOs
>> Sejal Architectural Glass
Sejal Architectural Glass IPO Analysis 9 June 2008 Source: www.keynoteindia.net
Sejal Architectural Glass Ltd. IPO details: Price Band: Rs. 105 - 115 per share Issue open between: June 9 - June 12, 2008 Book Running Lead Managers: Saffron Capital Advisors To List on: NSE and BSE Market Cap post-listing: Rs. 322 Cr or $75 million (based on the cap price) Highlights Sejal Architectural Glass Ltd. (SAGL) is into processing of insulating, toughened and laminated glass. The company also has a trading division which supports various in-house brands and products of other manufacturers. The products include tiles, sanitary-ware, mirrors, glass, etc. for home and commercial interiors. The per capita consumption of glass doubled from 0.4Kg in 1999 to 0.8 Kg in 2007. The flat glass industry in India grew by 90% during FY00-07. The demand for flat glass in 2005 was 1977 tonnes per day, a growth of 18.5% y-o-y. Construction and auto are the major user industries of float glass. Both these industries reported phenomenal growth during the past few years, on account of softened interest rates. However, the recent macro-economic developments are not very encouraging for construction / automotive industries. In the backdrop of the growing inflation, rising crude oil prices and increasing interest rate scenario, both industries are likely to see a marginal slowdown in the medium term. The glass industry is also going under the strain of over-capacity situation, cheap Chinese glass imports and lack of codes of standards for Indian glass. SAGL plans to set-up a glass manufacturing line (capacity of 550 tonnes per day) in Gujarat. The line is expected to commence production in March 2009. The Indian glass industry has immense potential to grow as the long term growth story in the construction and automotive industries in India remains intact. The introduction of low-cost cars and the changing focus of real estate developers to semi-urban cities due to high land prices can be major growth drivers. In our view, processing has been SAGL’s core strength. We believe there is an execution risk. Further the expansion will reflect in revenues only from FY10. The company has raised Rs310Cr in debt for the purpose of expansion, servicing of which can further impact profitability. Competing with other market leaders and marketing efforts would require strong management support. IPO is priced at 73.3x FY09E and 19.4 FY10E earnings. Considering the aggressive plans of the company (increasing balance sheet size by 6 times) and also taking into account execution risks, high leverage, recent macro-economic scenario, we recommend subscribing with a long term view only. To read more download full version of Sejal Architectural Glass IPO Analysis. |
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