P/B

May 10, 2011

Power Finance Corporation (PFC) Analysis – Follow-on Public Offering Buy/Sell Recommendation Not Bad but Not Great Either

Power Finance Corporation (PFC) will raise ~$1 billion through a follow-on-public offer (FPO) which is the first divestment by the Government for FY12.Note the government of India has set a target to raise $9 billion through divestment of public sector (PSU) companies stocks.PTC India Financial Services another company operating in the same segment offering finance to power generation companies came out with an IPO.Despite advantages of growth,a good business model in India’s booming Energy Sector,the valuation of the company had been kept too high leading to 20-30% losses from the IPO price.However PFC does not have a high valuation trading for around 9-10x P/E which is comparable to the competitors like REC.However the valuation is not very low also keeping in mind the rising interest rate environment which is making life tough for the Indian Banks and financial intermediaries.Power Finance Corporation has substantial advantages of growth,a good business model in India’s booming Electricity Sector where the List of Power Companies are growing exponentially.The valuation of the company also has been kept at a reasonable level at a discount of around 5% from the prevailing stock market price.The growth of the company has been impressive but a rising interest rate environment,competition from other power finance government providers like IFCI,IDFC,REC makes the issue neutral.It is always possible to buy the stock later or buy competitors in the same space like REC.The stock is a good buy for the long term given the fundamentals,good business sector,however current short term macro problems does not make it a great buy currently.
April 22, 2011

Future Ventures IPO Review and Analysis – Unique Indian Consumption Private Equity/Venture Capital Company with Cheap Valuation is a Good Buy

Future Ventures is a VC/Private Equity Company that has invested in a number of small Indian companies and startups mainly focused on the consumption industry in India.With India growing at around 8-9% in the last few years and expectations of strong future growth driven by consumption,Future Ventures seems a good investment considering the portfolio of companies that it owns (analyzed below).Future Ventures is a part of the Future Group run by Kishore Biyani who started India's most famous retail company Pantaloons.The Company has set a price band of 10-11 rupees a share with a target of raising around Rs. 750crore though the IPO.This would represent around 40% of the equity which would give it a post IPO market capitalization of around $375 million.Note the company had tried to come with an IPO 2 years ago but it was deemed to expensive at that time.
March 16, 2011

PTC India Financial Services (PFS) Review and Analysis – Too Expensive to Buy the Financial cum Energy IPO despite Quality and Growth

PTC India Financial Services has substantial advantages of growth,a good business model in India's booming Energy Sector.However the valuation of the company has been kept too high for essentially what is a financial intermediary.The growth of the company has been compensated by the high valuation making it not such a good buy especially in the context of the current stock market and economic conditions.It might be better to look at cheaper alternatives in the Indian Infra Sector.
March 7, 2011

Lovable Lingerie IPO Review and Analysis – Should you buy the Stock for some love?

Lovable Lingerie is an innerwear textile company that is coming out with a $20 million IPO.Unlike other totally junk issues which are totally hands of market operators,this one seems to have decent fundamentals and the valuation is not too expensive either.The company has managed to sell 6% pre-IPO to Sequioa Capital which is one of the blue blood PE firms in the country.However this should not be an endorsement given that a number of their investments have bombed in the recent mid cap and small cap carnage.Corporate governance and management issues in small companies in India is totally out of control so investing just based on pure fundamentals does not help.Also a number of other companies in the same sector in textiles remain at attractive valuations.That said the company does have good differentiation as it leverages on the fast growing Indian consumer growth story.The company sells Lingerie though top retail outlets like Lifestyle,Shopper's Stop in top Indian metros and has good brand recall.Here are the positives and negatives of the company based on its DRHP.
December 14, 2010

Punjab & Sind Bank set for Huge Oversubscription like MOIL IPO

Note the issue size of the IPO is quite small at around $100 million which means the retail portion is only $30 million.Coal India IPO with a $3 billion issue and $1 billion retail portion got subscribed by almost 2-2.5x.This mean that Punjab and Sind Bank can get subscribed by almost 60x since MOIL IPO got 55-60 times overall subscription with almost 31x retail portion even when the issue size was almost triple that of Punjab and Sind Bank.Note though MOIL IPO in my opinion was more undervalued than PNSB,still I think oversubscription in case of this PSU Bank would be higher than that and could easily cross the 31x retail that MOIL IPO got