December 06, 2012

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BHAVIK SHAH said...

CARE IPO -

Price Band: Rs. 700 - Rs. 750.
Retail Discount : NA .
Face Value: Rs.10.
Minimum Lot Size: 50 Shares.
Issue opens on: 07th December 2012, Friday.
Issue closes on: 11th December 2012, Tuesday.
Listing Date on: by 21st December 2012.
Total No. of Shares offered: 71,99,700 shares or 25.22 %
Employee Reservation: NA.
Net Public Offer: 6,61,15,000 shares.
QIB Book: 35,99,850 shares or 50 % of issue.
Non – Institutional Bidders: 10,79,955 shares or 15 % of issue.
Retail Book: 25,19,895 shares or 35 % of issue.
Equity Shares outstanding prior Issue: 2,85,52,812 shares.
Equity Shares outstanding post Issue: 2,85,52,812 shares.
Total Size of the Issue: Rs. 503.97 Crs - Rs. 539.97 Cr.
IPO GRADING: Exempted for Grading by SEBI.

CREDIT ANALYSIS AND RESEARCH LIMITED : Credit Analysis & Research Ltd (CARE) was incorporated in 1993. CARE is the second largest full service credit rating company among six players in India. They offer rating and grading services across a diverse range of instrument and industries including IPO grading and grading of various types of enterprises.

Valuations:
The company has fixed the price band at Rs. 700-750 per share. Based on FY12 annual EPS of Rs. 40.55, CARE will be trading at P/E range of 17.27 x to 18.5 x. This is at a significant discount to peers like ICRA & CRISIL which are trading at 27 x and 35 x respectively. For FY12 the consolidated revenues from operation stood at Rs. 190 Cr with Net Profit of Rs. 116 Cr resulting in Net Margin of 61.05 % with EPS of Rs. 40.55 CARE has consistently maintained high PAT margin of 53 % with strong ROE of 34 %. It is a debt free company. 85 % of its revenue comes from ratings business. At the IPO price the P/E is in range of 17.27 x to 18.5 x & P/B is in the range of 5.3 x to 5.6 x. Net worth o the company as on 3oth September 2012 is Rs. 427 Cr with Book Value of Rs. 149/share. Company has cash equivalents of Rs. 260 Cr. CARE is expected to post FY13 profit of around Rs. 100 Cr which can lead to EPS of close to Rs. 35.

Retail Investors can subscribe up to maximum of Rs. 2,00,000 per application. CARE has strong financial position and is high cash-generating business and which is available at very reasonable valuations.

According to me one should look for subscribing for CARE IPO, having 85 % o its revenue coming from rating business which earns better margins is thus being offered to public at very attractive valuation. CARE will be third listed company after CRISIL & ICRA - the rating agencies India Ratings (formerly Fitch), Brickworks & SME rating are unlisted. CARE can have Market Cap of around Rs. 2,141.46 Cr with cash of Rs. 260 Cr which brings its Enterprise Value of around Rs. 1,881.46 Cr at an Upper band of Rs. 750.

Thus, with attractive pricing & strong fundamentals with good institutional holdings the Long term investors should look into subscribing the IPO for good opportunity. Short term investor can subscribe for listing gains

December 06, 2012
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December 07, 2012

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