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Saturday, November 28, 2009

MBL Infra IPO - Should You Subscribe?

The initial public offering (IPO) of construction company MBL Infrastructure opened for subscription today. The company’s IPO is of 57 lakh shares of Rs 10 each will close on December 1. It plans to raise around Rs 100 crore via this issue.

Incorporated in 1995, MBL Infrastructures Ltd is engaged in the construction and maintenance of roads and highways, industrial infrastructure projects and other civil engineering projects for various government bodies and other clients.

Issue Open: Nov 27, 2009 - Dec 01, 2009
Issue Type: 100% Book Built Issue IPO
Issue Size (Shares): 5,700,000 Equity Shares of Rs. 10
Issue Size (Value): Rs. 94.05 - 102.60 Crore
Face Value: Rs. 10 Per Equity Share
Issue Price: Rs. 165 - Rs. 180 Per Equity Share
Market Lot: 35 Shares

Investment Advisor SP Tulsian says if shares were issued at Rs 165, at its lower band, it gave some room to make money on listing.

SP Tulsian said at the upper band of Rs 180, the issue looked fully priced, or even slightly overpriced. “MBL Infra is expected to have an EPS of Rs 22 for FY10, which results in a PE of over 8 times, at the upper band. Even the market cap of Rs 315 crore and EV of Rs 500 crore plus, at the upper band, looks quite stretched. So, if shares are issued at Rs 165, at its lower band, it gives some room to make money on listing. But at the upper band of Rs 180, it looks fully priced, or even slightly overpriced, with no scope being seen to make money on listing. Better plays in the secondary market are available.

IPO Grading / Rating

ICRA has assigned an IPO Grade 2 to MBL Infrastructures Ltd IPO. This means as per ICRA, company has below average fundamentals. ICRA assigns IPO gradings on a scale of 5 to 1, with Grade 5 indicating strong fundamentals and Grade 1 indicating poor fundamentals.

Looking at the ratings on stock fundamentals and recent IPO's like NHPC, it is better to stay away from this IPO. Do not invest in it.

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