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Mundra Port SEZ Public Issue

November 6, 2007

Mundra Port and SEZ [MPSEZL] is the first of its kind of IPO in India. Mundra Port has been operational since 2001 and now it has got approvals for SEZ as well.

MPSEZL, primarily deals in providing bulk cargo services, container cargo, crude oil cargo and value-added port services, including railway services between Mundra port and Adipur.

Objects of the issue:
Construction and development of infrastructure facilities in the proposed SEZ at Mundra. 7,000mn. Construction and development of a terminal for coal and other cargo at Mundra Port. 4,500 mn. Investment in Adani Petronet (Dahej) Port Pvt. Ltd. 4,500 mn. Investment in Adani Logistics Ltd. 4,500 mn. Investment in Inland Conware Pvt. Ltd. 4,500mn. More details on the project can be read here.

Analysis and Recommendation:
The current IPO is of Rs 1,700 crore in size. Retail portion is 30% of it ~ Rs 510 crore. We cannot compare the P/E or other usual ways for this stock. So we had a look at international peers. MPSEZ has an EBITDA margin of 53% while Tianjin port in China has 43%. Net Profit Margin for MPSEZ is also higher at 33% compared to 27.6% for Tianjin. Price to Sales are also comparable while Price to Book Value is certainly expensive for MPSEZ at 18.7.

We recommend a SUBSCIBE with Long Term holding [3 years]. Grey market premium is around Rs 150 and may go down with the market. Be prepared to hold for long term, for good gains. If the retail portion of the issue is over-subscribed by more than 15 times, then allotment will go in lottery. Check back for more updates.

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