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Should You Invest In PSP Projects IPO?
With high Price to Book value ratio, the IPO looks expensive and investors can consider the stock after its listing on the exchange.
PSP Projects,a Gujarat based company engaged in construction, opens its initial public offer for subscription today until May 19, 2017. The initial price band of the offer has been keep at Rs. 205-210 per equity share of face value of Rs. 10 each. Investors can subscribe for a minimum of 70 equity shares and in multiples of 70 shares thereafter.
Companies Line of Business
The company's clientele in the construction sector includes the state government, institutional as well as industrial entities. PSP Projects has also executed residential and non-residential projects. The company's order book, spanning orders from Karnataka and Rajasthan in addition to Gujarat, totals to Rs. 927 crores. The company anticipates completion of 90% of the order book by the current FY.
IPO Objectives
With the IPO, PSP Projects aim to garner a total of Rs. 207- Rs .212 crore. Rs. 151 crore through a fresh issue and an OFS or Offer for Sale of Rs. 60 crore from the promoter group. The company plans to put Rs. 63 crores towards working capital requirement. Rs. 52 crores for capital expenditure and the remaining for other corporate endeavors.
PSP Projects Financials
The company's standalone revenue increased to Rs. 467 crore in the FY 2016 witnessing a staggering growth of 26.8% in the five years time to FY 2016. Net profit of the company stood at Rs. 24.9 crore while its debt to equity ratio and return on equity (ROE) is 0.7 and 44% respectively.
Valuations
PSP Projects seeks a valuation i.e Price to Book value of close to 7 seems to be expensive in comparison to those offered by more diversified and established peer companies.
Conclusion
With high valuation figures, individuals shall consider the stock after its listing on the stock exchange when the price then at some point goes below the IPO price band of Rs. 205-Rs. 210.
