How to analyse an IPO

The year 2008 was one of drought as far as Initial Public Offers (IPO) goes. But with a revival of sorts in the markets, quite a few of these are lined up, with one — that of Mahindra Holiday and Resorts — already through. Investing in an IPO is a shade trickier than an existing company since not much information about it — financial or otherwise — will be publicly available. This is where, as a rule, the prospectus comes in as the best possible source of comprehensive information on the company.
Since the bulky document may appear a tad intimidating to the new investor, here are a few guidelines on how to pick relevant information, and what to base your investment decision on.
Any issue prospectus will be divided into seven sections — risk factors, an introduction to and detailed information about the company, financial information, details on the issue, legal and other regulatory information. Of these, the company background and business model, the industry it operates in, purpose of the issue, financial performance and risk factors are areas you should concentrate on.
The year 2008 was one of drought as far as Initial Public Offers (IPO) goes. But with a revival of sorts in the markets, quite a few of these are lined up, with one — that of Mahindra Holiday and Resorts — already through. Investing in an IPO is a shade trickier than an existing company since not much information about it — financial or otherwise — will be publicly available. This is where, as a rule, the prospectus comes in as the best possible source of comprehensive information on the company.
Since the bulky document may appear a tad intimidating to the new investor, here are a few guidelines on how to pick relevant information, and what to base your investment decision on.
Any issue prospectus will be divided into seven sections — risk factors, an introduction to and detailed information about the company, financial information, details on the issue, legal and other regulatory information. Of these, the company background and business model, the industry it operates in, purpose of the issue, financial performance and risk factors are areas you should concentrate on.
Business :
The section ‘About the Company’ gives a detailed description of the nature of the company and its business models; understand how and where the company accrues revenue, and if it is sustainable.
This includes going back to the history of the company, since it explains how the company has developed over the years, acquisitions made, milestones crossed, subsidiary activity, all of which are indicators of the consistency of performance and sustainability.
If possible, compare revenue models with those of existing peer companies to identify if, and where, the company has an advantage. If any competitor is already listed, use it as a comparison for performance, valuations, financials, and strategies.
Also included in the business section is an overview of the industry. Scrutinise it thoroughly to get a grip on the future of the industry and the company’s own prospects within it. As far as financials go, analyse these as you would for any other company.
Strengths:
The company will list its ‘strengths’ — what it considers as an edge over peers — again in the business section. Give these a once-over, paying attention to the details only if the said strength stands out — for example, Gitanjali Gems has a diamond sourcing agreement with Diamond Trading Corp, a key strength since the company is ensured of access to good quality rough diamonds which most peers do not enjoy. Sizeable market share (check source of data here), backward integration, and so on, are other factors favouring the company.
Take the strengths with a pinch of salt, since companies sometimes tend to paint a brighter picture than what they actually are. Conclude yourself if the point given in reality works in the company’s favour significantly.
Risks :
Risks detailed are wide-ranging, from an economic scenario to company-specific, which must be noted to understand potential downside to your investment. Risks are explained at the start of the prospectus.
Some risks given are general in nature and can be ignored, such as political instability, natural calamities, competition from peers and such, which are usually applicable to all companies, regardless of industry.
Legal issues that have a significant bearing on the functioning of the company, are also given here — for example, Mahindra Holidays has a resort in Munnar, where the land is under legal proceedings since it was said to be agricultural.
Now if the case goes against Mahindra, it will mean closure of a flagship resort and loss of revenue from it.
Understanding such material legal proceedings allows you to skip most of the section on legal issues that appears later in the prospectus. For example, legal issues regarding taxes, labour and such need not be combed through.
Objects:
The purpose of the issue is explained in depth, and companies are required to explain the utilisation of funds raised in subsequent annual reports.
Proceeds from the issue can go towards any number of purposes, from repayment of debt to working capital, from capacity expansion to company acquisitions besides covering issue expenses. Fund utilisation should, as far as possible, contribute to revenue generation and earnings expansion.
For example, companies may raise funds to either ramp up production capacity which may lead to increased sales, or to pay back high-cost debt resulting in lower interest costs and more leveraging capability; or for acquisitions that may add to revenues. However, the time taken to accomplish the stated objectives needs to be gauged.
Check the amount of funds set aside for issue expenses, which include advertising and promotion, printing of the prospectus and so on. Check also whether the proceeds of the IPO go entirely to the company; some IPOs involve a stake sale by the promoters in which case funds raised would not accrue to the company.
Other sections you can glance through are the regulations and policies the company is subject to, the management team and the relevant experience they hold and the instructions to bidders in the section detailing the issue — just to make sure you don’t inadvertently mess up your application.

SBI cuts car loan rates

To increase its credit offtake and market share, State Bank of India on Saturday reduced the interest rate on car loans to 8 per cent for the first year. For the second and third years, the bank will charge 10 per cent, and from the fourth year it will charge the then prevailing rate.
SBI’s car loan scheme is available for new cars and also for balance transfers, that is, those who have borrowed from other banks can transfer their loans to SBI at lower rates. “We want to increase our auto loan portfolio and the penetration of auto loans. We have been able to find business logic, while others have not been able to,” said a senior bank official.
Starting from Monday, the bank’s card rates for car loans will range between 11 and 11.5 per cent, which is 25-75 basis points below the BPLR of 11.75 per cent. In February, the bank had launched a car loan scheme that offered funding at 10 per cent for a year. The scheme was on till May and was extended till September.

Under the car loan scheme, the bank’s disbursement touched around Rs 300 crore a month and with the further reduction in interest rates it may go up some more, said a senior official from the bank.
The bank’s auto loan portfolio is currently at over Rs 9,000 crore and it is now the largest financier of new cars.
Even under its special scheme of home loans at 8 per cent fixed for a year, the bank has been able to lure a significant number of customers away from other banks. Till mid-March, the bank had sanctioned Rs 1,350 crore under the special home loan scheme.
The bank cut its BPLR by 50 basis points, with effect from June 29

Indian stocks best performers across the world in 2009 so far

Indian stocks have emerged as the best performers among those in the emerging and the developed markets across the globe so far this giving investors the highest return of nearly 60 per cent. According to an analysis of MSCI Barra indices, a measure of returns from various stock markets across the world for foreign investors, Indian stocks have outperformed their global peers, including in the US, the UK and China in 2009 so far. Indian stocks have provided a return of 59.30 per cent year-to-date, against 34.37 per cent gains provided by MSCI Barra's emerging market index, covering all developing nations. Indian stocks have even outperformed all the developed world markets covered by MSCI Barra, as the markets in the US and the UK gave returns of just 2.33 per cent and 10.17 per cent, respectively, so far this year. Among the emerging BRIC (Brazil, Russia, India and China) nations, the Brazilian market was the closest competitor with gains of 56.89 per cent till June 26 this year. The Chinese and the Russian markets have given returns of 36.77 per cent and 41.61 per cent, respectively, in the year so far. The 30-share benchmark index of Indian stocks, Sensex, gained over 5,000 points in the year so far to settle at 14,764.64 points on June 26 compared to 9,600 levels on December 31, 2008.

DRA International: An engineering company in complete "Mining Solution"

The DRA Group is a multi-disciplinary, multi-national organisation that specialises in project management in mining, infrastructure and mineral process plant design and construction. One of the largest project management enterprises in Africa, DRA's South African-founded group of companies has constructed plants located on five continents.DRA offers expertise in Process Engineering, Electrical and Instrumentation Engineering, Mechanical Engineering, Civil and Structural Engineering, Infrastructure Engineering, Materials Handling, Winder Engineering, Mine Engineering, process plant operations and maintenance management. DRA also offer services in pre-feasibility and feasibility studies, procurement of equipment and supplies, fabrication and erection, commissioning and training.
DRA manage projects with a 'zero harm' focus evident in their excellent safety record. DRA utilise world class quality standards, systems and procedures which are based on ISO standards. Currently they are preparing for ISO Certification.
DRA has offices located in mining areas around the world. The company’s highly regarded complement of professional engineers (of all disciplines) in conjunction with draughting, support services and safety management teams, combine to project manage, design and construct mines for clients worldwide.

A key element of DRA's success and capability is Minopex, one of the group companies, which operates mineral processing plants on a medium term contract basis. Add to this the competence of DRA’s mine winder specialist division and DRA's mining division, and group has the expertise to offer the entire spectrum of mining services. Effectively DRA is a one-stop-shop to mineral rights owners who wish to convert their resource into wealth.

A list of Indian Mining Companies

20 Microns Limited - Producer of industrial functional minerals
Ashapura Minechem - Industrial minerals exporter
Bird Group of Companies - Consortium of coal, limestone and mineral exploring companies
Bombay Mineral - Manufacturer minerals and refractories
Central Mine Planning & Design Institute - Exploration, mine planning & design
Export Linkers - Mica flakes and powder manufacturer
GR Group - Mining and processing of mica
Indian Metals and Ferro Alloys - Power generation and chrome ore mining
JM Exports - Mica exporters
Kariganur Mineral Mining Industry, Hospet - Iron ore producer
Kerala Minerals & Metals - Mineral producer & separator
Kudremukh Iron Ore - Iron ore concentrate & pellets
Mahavir Minerals - Manufacturer & exporter of feldspar, quartz, mica etc
Mitco - Supplier of industrial minerals
Neyveli Lignite Corporation - Open-cast mechanised lignite mining
Neyveli Lignite Corporation - Lignite mining & thermal power generation
Orissa Mining Corporation - Iron, chromite & manganese mining
Parasramka Mica Industries - Mica manufacturer
Resources International - Production & export of iron ore
Rockwell Engineering - Equipment for underground and surface mining
Rungta Mines - Mining of iron & manganese ore
Sahjanand Group - Manganese dioxide and ferro alloys manufacturer
Tamil Nadu Magnesite Limited - Exploration & preservation of magnesite mineral ore
Timblo Ltd - Involved in iron and manganese ore mining and export
Tungabhadra Minerals - Involved in iron ore mining
Unotherm - Refractories, insulations, refractory raw material and minerals supplier

Crisil sees house market recovery in 2010

Mumbai, June 24 Demand in the Indian residential market is expected to turn positive in 2010 due to improvement in affordability, steady economic growth and greater liquidity, says a Crisil research report on the real estate sector.
However, the decline in the currently overpriced capital values of all three real estate segments of residential, commercial and retail will persist through 2009. Commercial and retail markets will continue to see erosion of lease rentals in the next two years, it says.
The report is an analysis of over 400 areas across 88 micro-markets in Ahmedabad, Bangalore, Chandigarh, Chennai, Hyderabad, Kochi, Kolkata, Mumbai-MMR, National Capital Region and Pune.
Mr Sudhir Nair, Head, Crisil Research, said: “Accelerated growth of Indian economy, recovery of global economy, improved liquidity and expected fall in interest rates are key factors that will signal demand revival in the residential segment. This segment is likely to see a much faster revival due to a strong underlying demand for housing and supply coming at attractive price points.”
The demand in the commercial and retail segments is likely to remain under stress the next two years owing to excess supply and weak offtake, he added.
The report says capital values for residential sector and lease rentals for commercial and retail properties had substantially corrected till March due to a slowdown in both the domestic and global economies, and also due to real estate becoming unaffordable.
Kochi, Chandigarh and Pune, which have greater investor presence as against end-users, saw a greater fall in capital values compared to other cities. The situation is expected to continue through 2009 and 2010, particularly in the commercial and retail segments.
However, Crisil Research believes that demand for houses will improve in 2010, backed by lower home loan interest rates as well as better job security owing to higher growth in the economy.(Courtesy: Business Line,Thursday, Jun 25, 2009)

Brushman(India) Ltd: Multibagger in making

The Company was incorporated in the name and style of BRUSHMAN (INDIA) PRIVATE LIMITED under the Companies Act, 1956 as a private limited Company on 25th January 1993 issued by the Registrar of Companies, Delhi & Haryana. The Company became a public limited company on 16th November 1994.
PRESENT BUSINESS OF THE COMPANY
BIL is the largest manufacturer of paint brushes in India. BRUSHMAN brand of paint brushes are the only brushes available on a nation wide platform and is the largest selling singular brand of paint brush. Apart from paint brushes, BIL is also into manufacture of artist brushes, wire brushes, paint rollers & putty knives.
The Company is now putting up an integrated manufacturing plant in Pantnagar, Uttranchal to manufacture paint brushers, wire brushes, artist brushes, and hair brushes. It is noteworthy that Denman International Ltd., U.K., who are the World's largest manufacturer of hair brushes and who have also invested in the equity of BIL, are giving free technical know-how to manufacture hair brushes and around 34 qualities of hair brushes/combs which shall be manufactured by BIL at the Pantnagar plant shall be exported to Denman International Ltd. For their global markets.
The land for the new plant was acquired in October 2005 and construction work is in full swing. The company expects production to commence by December 2006.
It may be added that the Company shall enjoy all fiscal benefits granted by the Central Govt. for setting up the plant in Pantnagar, Uttranchal.
2. HAIR CARE PRODUCTS
Denman International Limited, UK
BIL made it first foray into cosmetic products in 1996 with a strategic distribution alliance with Denman International Ltd, UK, to market the renowned `Denman' range of hair brushes in India and the SAARC region.
Denman International Limited (DIL) is a subsidiary of Denroy Group, established in 1972. DIL is the UK's largest manufacturer and supplier of hairbrushes and hair accessories, which are exported to more than 72 countries worldwide. The company works in partnership with other companies from the hairdressing industry and has a reputation for developing innovative products. Most of the worldwide patents for hairbrushes are IPR of DIL.
DIL is now entering into a manufacturing agreement with Brushman, which gives BIL the manufacturing right to make select `Denman' products in India on a licence basis. 34 varieties of combs/brushes have been identified and original Denman tooling is in India for commencing exports to Denman. BIL plans to set up the manufacturing facility at Pantnagar (Uttaranchal)
Sales Network for Denman products in India is largely retail oriented. Some ranges of `Denman' hairbrushes are exclusively meant for the salons, which are routed through the Professional Salon network.
Keune, a family owned Dutch company, develops and manufactures exclusive hair cosmetics since 1922. It has an image of credibility based on more than 80 years of experience and possesses one of the best research laboratories in Europe. Keune has a wide range of products including Tinta Colors consisting of 78 Color Shades, Shampoos, Conditioners, Gels, Mousses, Hairsprays, treatment line of lotions for dandruff, falling hair, dry hair etc.
For Keune products the marketing network is primarily the Professional channel comprising of salons and beauty parlours.
Keune Hair Cosmetics, B.V. Holland has invested in 7,00,000 equity shares of Brushman India) Limited ,which were allotted on preferential basis U/S 81(1A) on 28.09.2005.

Brushman (India) Limited, one of the leading manufacturers of paintbrushes, is the only listed company in the country in its category. The company prides itself for being the manufacturer of the largest variety of branded paintbrushes in India. The company has the most sound distribution network, unmatched by any other product in the category. Today, a national network of 2200 distributors and 1000 sub-dealers market the Brushman product.
Brushman brushes are characterized by their superior quality, vast variety and reasonable price range that differentiate them from competing brands. As a matter of pride, the product was adjudged the best in terms of its quality when it was awarded the "INTERNATIONAL DIAMOND STAR OF QUALITY" in 1996, followed by the "EXCELLENCE AWARD" conferred by the Institute of Economic Studies (India) for maintaining the highest quality standards.
The company diversified its operations in 1996 and entered into a distribution agreement with Denman International Ltd., U.K., for distributing the Denman range of hair care products in India, Sri Lanka and Nepal. With a reputed consumer brand product now in hand, a strong salon/distribution network was established. Today, Brushman can proudly claim that their existing distributors are the Most Powerful people in the salon/ cosmetic business.
To further augment its product portfolio, Brushman entered into a strategic tie-up with Keune Hair cosmetics, a Dutch company, which has over 83 years of experience in hair care products. Keune hair products are exclusively developed for professional use, and are launched in the market only after they undergo a thorough research for best ingredients and compositions in the most advanced laboratories in Europe.
Brushman believes very strongly in maintaining its high quality and standardization and is forever committed towards bringing the latest, safest, most exciting and innovative life style products to its customers.

Recomendation: Retail investor can choose this stock for a target of 100-120 for a time span of 1-2 yrs.