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M and B Switchgears IPO: investors should stay away
The price band for the stock has been fixed at Rs 180 to Rs 186 per equity share. The issue closes on October 5, 2011. Post issue the company's new shareholder will constitute 25% of share capital of the company. The shares of the company will listed on both the BSE and NSE.
The book running lead manager for the company is D&A Financial Services Private. ICRA, the rating agency, assigned it an IPO Grade of '2/5’ to the new issue. This indicate that the business has a'below average fundamentals’ according to the ICRA.
The purpose of raising the proceeds was to part finance the project under which it is setting up a new grid connecting Gagorni in Rajgarh district of Madhya Pradesh.
M and B Switchgears has been manufacturing transformers over 30 years. Now the company is diversifying into solar power projects to meet the big demand-supply gap in renewable energy.
To fill this gap in the power sector M and B Switchgears is setting up 2 MW of grid connected PV Solar Power Project in Rajgarh district of Madhya Pradesh. This project has been funded through internally and also a term loan from the banks. Through the IPO, the company plans to further strengthen its presence by installing additional 4 MW grid connected to the same project.
While the idea and the rationale seems intriguing considering shortfall in thermal fired plants. But its success will hinge on many additional factors, government policy, rate of coal and how the global economy reacts to global events. It best for investors to stay away from the IPO but look up the company next year after it files its annual results for better judgment.
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