GIPL: Where the angels fear to tread

Gammon Infrastructure Projects Ltd (GIPL) may join the list of withdrawn IPOs due to lack of subscription. GIPL is offering 11.45% of its post-issue paid up capital for a price of Rs 167 to Rs 200 per share. This translates into a range of Rs 276.385 crore to Rs 331 crore. Accordingly the company is valued in the range of Rs 2413.8 crore to Rs 2890.8 crore.

These valuations are difficult to justify by any standards particularly when the stock markets are bleeding. The fact that the company is asking for a Price Earnings (PE) ratio of over 100 based on Estimated FY08 earnings is simply ridiculous. At this time, Infrastructure companies with sound financials like IVRCL Infra are available at a Trailing Twelve Month (TTM) PE ratio of 27. It was only last month when investors saw Infra IPOs like KNR and IRB trading below their issue price.

While the chips are down after the Budget and retail investors shying away from share markets, subscription of the retail portion (30%) looks a distant dream. Qualified Institutional Buyer (QIB) portion (60%) may be fully subscribed.

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