DalalStreet.Biz initiated its coverage on Sobha developers IPO last week. Sobha Developers Review – 1 is here and Sobha Developers Land Bank Details is available here.
Vidya Bala, writer for Business Line newsppare writes that, Sobha’s offer price at Rs 550 or Rs 640 is at a P/E multiple of 19 or 22 times its expected earnings for Fy08 [Not FY07]. Why isn’t Vidya writing about FY07 ? Why isn’t Vidya clearly stating the figures ? Oho! their can be some Page3 scenes going in the background 🙂 . Lets analyze this. Offer price of Rs 640 at 22 times P/E translates into earnings per share of Rs 29 for FY08. Which translates into a Net profit of Rs 211 crores for FY08 on an equity of 7.29 crore shares of face value Rs10 each.
Sobha’s profits for first half of FY07 (sept-30th 2006) is Rs 53 crores. It has recorded a 137% growth over first half of last year. So if we assume Sobha grows at 100% for full year its net profits for FY07 will be 180 crores. So in FY08 will Sobha Developers just grow by mere 17.20% ? [Net Profit of 211 crores as arrived above.] When and where will growth slowdown ? I hope you now understand what is the problem with Business Line Analysis.
Business Line also writes that investors with HIGH RISK APPETITE can subscribe to the issue. Your thoughts and comments are appreciated. Mail them to nascentnet AT Yahoo Dot Com.