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Gammon Infrastructure Projects – Avoid

March 11, 2008

IPO RecommendationGammon India Ltd, the flagship company of the Gammon Group, is among the leading construction companies in India and also the company which built the Hyderabad Flyover that collapsed 🙂 [Gamoon Infra]GIPL has 14 projects under its asset portfolio. The projects are fairly diverse spreading across roads, bridges, ports, hydro power projects and biomass power projects. The company is fairly small and hence seeing good growth rates. However, in construction we need scale and size matters.

Financials:
The company is cash flow positive and annualizing 6 months FY08 earnings the company is expected to report a Net profit of Rs 24 crore [Rs 32 crore FY07]. At the price band of Rs 167-200, the offer values the company at 33-40 times the expected per share earnings for FY 2010. When market leaders such as Punj Lloyd, Hindustan Constructions, Nagarjuna are available at a discount, we don’t find any compelling reason to subscribe to the issue.

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