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Saturday, August 21, 2010

Should you buy IPO of Gujarat Pipavav Port ?

Gujarat Pipavav Port (GPPL), a developer and operator of APM Terminals Pipavav port, is coming out with its Rs 500 crore Initial public offering on August 23, 2010. Should you buy IPO of GPPL for investment? Let's checkout.

Issue Open: August 23, 2010
Issue close: August 26, 2010
Price Band: Rs. 42 - Rs. 48 Per Equity Share
Minimum Bid Size: 130 Equity Shares
Face Value: Rs. 10 Per Equity Share
Issue Type: 100% book building
Maximum Subscription Amount for Retail Investor: Rs. 100000

GUJARAT PIPAVAV PORT IPO:

Gujarat Pipavav Port (GPPL) is the developer and operator of APM Terminals Pipavav, India's first private sector port, which has multi-cargo and multi-user operations. GPPL have the exclusive right to develop and operate APM Terminals Pipavav and related facilities until September 2028 pursuant to the Concession Agreement with GMB and the GoG.

Mundra Port and SEZ Ltd (Mundra) is another company in similar business but they are not comparable as GPPL is smaller and provides limited services comparing to Mundra which has SEZ and other assets. GPPL has a lower margin as compared to Mundra as the company’s utilization rate was lower and it was incurring costs to expand capacity and relocate its LPG cargo ports. Going forward, with the operational efficiency, startup of LPG cargo services and lower debt burden, company could improve it's operating margin and profits substantially.

GPPL is backed by a strong promoter group - APM Terminals, which is one of the biggest terminal and port operators in the world and the IPO grade assigned to the company takes this into account. APM Terminals brings to the company technological expertise, best practices in port operations, and a strong and experienced management. APM Terminals Pipavav enjoys favourable oceanographic conditions, well-developed infrastructural facilities, and good rail and road connectivity to the hinterland, as per CRISIL notes.

IPO Grading / Rating:
CRISIL has assigned an IPO Grade 4 to Gujarat Pipavav Port Ltd (GPPL) IPO. This means as per CRISIL company has 'Above Average Fundamentals'.

GPPL has long term growth prospects and they have a scope to expand the margins. Investors may buy IPO of GPPL with long term horizon in mind. Looking at above average fundamentals, listing gains are also possible.

Draft red herring prospectus for Gujarat Pipavav Port IPO is here.

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