Supreme Infrastructure India Limited IPO

[Alchemist]

Supreme Infrastructure India Limited IPO

Opens: 21st September 2007.
Closes: 26th September 2007.

Price Band: Rs 95 to Rs 108.

Number of shares offered: 34,75,000 (34 lac+).

IPO Size at the two ends of the price band: Rs 33 crore to Rs 37.5 crore.

Number of shares outstanding before the IPO: 104 lac.
Number of shares outstanding after the IPO: 138.75 lac.

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This is one of the smallest IPO issues to hit the markets in recent times.

Supreme Infrastructure India Limited currently has Rs 60 grey market premium.

This is more than 50% premium.

Supreme Infrastructure India Limited is a good company and the probability of allotment is very low.

Investors can apply if they wish, but should not expect more than 60 shares.

Only 12.16 lac shares are available for the retail investors. This around Rs 13.2 crore worth of shares for the retail investors.

[Alchemist]

Supreme Infrastructure India Limited is basically a small construction company focusing mainly in roads and highways.

The company has more than two decades of experience in its field. Most of the company's revenues come from road-related projects.

Supreme Infrastructure also runs
-A Ready Mix Concrete (RMC) plant. (Will set up a second RMC plant from the IPO proceeds).
-A wet mix plant.
-An asphalt mix plant.
-Quarrying and crushing units.

These units are mostly for captive consumption. The integration of these units with the construction business means that the raw material costs for the company go down and margins are better than other players in the same segment.
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Recently the company has ventured into the real estate space. The company has not completed any real estate project till now. Currently it is developing a real estate project (IT park) on the land owned by one of its promoters.

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Most of the proceeds on the IPO will be used for purchase and upgradation of plant and machinery.

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The company has an excellent growth record and this momentum is likely to continue for next 2-3 years.

The revenues for last five years have been:

FY2003: Rs 8.00 crore.
FY2004: Rs 23.83 crore.
FY2005: Rs 46.76 crore.
FY2006: Rs 54.79 crore.
FY2007: Rs 95.93 crore.

FY2008 Q1: Rs 38.01 crore.

The profits for last five years have been:

FY2003: Rs 0.12 crore.
FY2004: Rs 1.20 crore.
FY2005: Rs 5.81 crore.
FY2006: Rs 6.85 crore.
FY2007: Rs 12.76 crore.

FY2008 Q1: Rs 5.78 crore.

The company will have 1.3875 crore shares outstanding after the IPO.

Thus adjusting for post-IPO dilution, the eps for FY 2007 was Rs 9.2.

The FY 2007 based PE works out to be 11.74.

This is a very attractive valuation for a company growing at such a rapid pace.

Listing gains are certain, but being a small issue, chances of allocation are very slim.

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Currently, the company has an order book of Rs 330 crore, which is equal to nearly four times FY 2007 revenues. For next 2-3 years, the company has a secure growth path.

The company gets 62% of its orders from just two clients - NHAI and Sadbhav Engineering.

This is significant risk factor. However, looking at the current order book, it seems unlikely the company will have a lack of work for the next few quarters.

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Supreme Infrastructure is in a boring business. It gets orders from government/other contractors and builds roads.

The integrated model of the company gives Supreme better margins than other players in the same field and thus gives it the ability to bid more competitively for projects.

Supreme Infrastructure has enjoyed 10%+ profit margins in its projects, which is pretty good for a road construction company.

With no previous experience in real estate, one can neglect that part of Supreme's business for now.

The IPO has been priced very attractively. Investors can apply for listing gains. Also looking at the current order book, one can hold the stock for next 18-24 months for more appreciation.

Infrastructure is a fast growing segment of the Indian economy and infrastructure stocks will create great wealth in next 10-20 years.

However, it is difficult to predict fortunes of small companies like Supreme Infrastructure. Thus an investor will have to keep a regular check on this company and make sure that everything is going right for it.

[Alchemist]

Final subscription figures for Supreme Infrastructure IPO:

Qualified Institutional Buyers (QIBs) segment: 52.1 times.

Non Institutional Investors segment: 65.4 times.

Retail Individual Investors (RIIs) segment: 48.2 times.

Details: http://nseindia.com/content/ipo/ipo_current_siil.htm

[vidyakumar]

Hi,
I had applied for Supreme infrastructure IPO through sharekhan online trading.
No shares were allocated to me so I got the refund check also.

But Iam unable encash the check because the bank account( ICICI ) which i have given was changed to another branch and they have given me new account number. Bank Officials told that old account is closed it is not possible to encash this check

what shall I do now...how to encash my check. I have updated my information with new account number in sharekhan .

please suggest me about this,

Thanks and Regards,
Vidyakunmar

[Alchemist]

Originally Posted by vidyakumar

Hi,
I had applied for Supreme infrastructure IPO through sharekhan online trading.
No shares were allocated to me so I got the refund check also.

But Iam unable encash the check because the bank account( ICICI ) which i have given was changed to another branch and they have given me new account number. Bank Officials told that old account is closed it is not possible to encash this check

what shall I do now...how to encash my check. I have updated my information with new account number in sharekhan .

please suggest me about this,

Thanks and Regards,
Vidyakunmar

You will have to write to the registrar for a new check.

Send a mail by registered post.
Send a copy of the check.
Send the details of the application and new bank account.

I have never experienced such an issue, but I think the registrar will issue a fresh check for the new bank account.

First, the registrar will verify the bank account that is linked to the demat account and then send a check for the same bank account.

[Alchemist]

Supreme Infrastructure expects

FY 2008 revenues to be Rs 150 crore.
FY 2009 revenues to be Rs 220 crore.

Current order book is Rs 450 crore.

FY 2008 eps to be Rs 18 - Rs 22.

At Rs 200, the stock is trading at 10 times FY 2008 earnings and may be 7 times FY 2009 earnings.

There may be more upside to this stock - in the medium term.

It seems like a hold for me - at least for next 8-12 months.