ESL Steel Company Overview | Unlisted Shares Info | IPO Date Review

 

Electro steel Ltd. (ESL Steel) is entering the capital market on 21 September 2010 with a public issue of 22.55 crore value portions of Rs.10 each, in the value band of Rs.10 to Rs.11 per share. Issue moreover

has a green shoe choice of upto 3.38 crore value shares.

It appears to be that the organization and its advertisers are taking a jump past their ability, raising feelings of trepidation of the organization and its advertisers failing on their noses! Essentially that is the derivation which one

can draw from the previous encounters of a few driving modern gatherings in 94-96, as Jindals, Essar, Lloyd, Usha Ispat, Ispat Industries and so on.

The organization is setting up a 2.20 million TPA steel plant with all out capital cost of Rs. 7,362 crores. This is being supported by term credits of Rs. 5,447 crores and value capital of Rs. 2,068 crores, post Green Shoe Option. Abundance reserve being activated, of Rs.153 crores, will be utilized as edge cash for Bank Guarantees and general corporate purposes. Of the absolute limit of 22 lakh TPA, 5 lakh tons are for wire poles, 7 lakhs

tones are for TMT bars, 3.34 lakh tones are for D1 Pipe, 2.7 lakh tones are for billets and 4 lakh tones are for pig iron.

Absolute obligation of Rs. 5,447 crores, has been authorized by 30 banks, of which, Rs. 2,442 crores has been dispensed by these banks till 31-07-2010, as expressed on page 67 of RHP. In any case, fiscal summaries introduced

by the organization, as at 30-06-10, shows sum drawn of gotten advances, at Rs. 2,514 crores. Such monetary inconsistency chafes, particularly in a deal report!

Likewise, the course of pre-IPO assignment of value shares by the organization has been nonstop and was made, as late as, upto 26-08-10 and 01-09-10. This might be the explanation that part of pre-IPO tired allottees are seen

offloading the offers held by them in private arrangements, as clear from the exchanges occurring in the Kolkata market, over the most recent few months. Low advertiser stake of around 34% likewise doesn't impart a lot

certainty.

Infect, advertisers of the organization, Electro steel Castings, a current recorded organization, doesn't have profundity any monetary muscles to set up such a major venture. This organization had a topline of Rs. 1,670 crores, on

solidified premise, for FY10, with PAT of Rs. 235 crores and money benefit of about Rs. 300 crores. Obligation in the books of the organization, as at that date was near Rs. 500 crores, with total assets of the organization being

put at around Rs. 1,600 crores and market cap of near Rs. 1,500 crores, as on date.

The organization professes to have been set up, as a piece of in reverse combination procedure of its advertisers, yet has managed without having unrefined substance possession in this organization. Advertiser, Electro steel Castings are possessing

the mining squares of iron mineral and coking coal in the province of Jharkhand and have consented to supply whole iron metal prerequisite of the organization and 30% coking coal necessity, for a time of 20 years, from the date of

beginning of business creation by the organization, on cost in addition to twenty percent. This infers that deferral on piece of elevating organization to begin mining will contrarily affect the feedstock security

of the organization, as likewise, wasteful working and greater expense of creation at mining are to be borne by the organization. Additionally, this sort of plan is never considered to be soothing by the market and experts, particularly

whenever it is placed with the gathering organizations.

This organization will have numerous contenders like advertiser organization, Usha Martin, SAIL, Tata Steel and so forth yet can preferably get contrasted and Usha Martin Ltd., which had a topline of over Rs. 2,500 crores for FY10, on

solidified premise, with PAT at Rs. 168 crores and total assets of over Rs. 1,600 crores on small value base of Rs. 30 croers, bringing about an EPS of Rs. 6.50. Obligation of Usha Martin, as on date, was near Rs. 1,200

crores as it were.

However, the organization desires to begin business creation from October 10, it will undoubtedly get deferred, considering the advancement of the undertaking, which might occur by March 11, till it settles with the business

creation

High value base of the organization at over Rs. 2,000 crores, low advertisers stake of 34%, tough opposition in the area, low monetary ability of the advertisers, high obligation value proportion of near 2.5:1 are generally unsafe and

horrible elements of the issue.

One shouldn't get attracted by the low sticker price of the issue, as it could in fact slip beneath its presumptive worth, in the occasion any postponement or misfortunes being posted by the organization in the underlying time frame, chances of which are high and

logical.

Considering these, keep away from it, as better IPOs are accessible in this jam-packed IPO market.