PE-Backed Titagarh Wagons’ IPO Opens Today; Rs 540-610 Price Band
The IPO of private equity backed railways wagons manufacturer Titagarh Wagons opens today and closes on March 27. The issue is managed by Kotak Investment Banking and JM Financial. Titagarh’s issue will see a sale of 2.4 million equity shares of face value Rs 10 a share at a price band of Rs 540-610 apeice to raise about Rs 126 crore. The issue represents 12.9 per cent of the post-IPO paid-up equity capital of the company.
At the upper price band, the issue is valued at 21.6 times its FY08 estimated EPS. This is 20 per cent discount to its nearest rival Texmaco. On March 13, private equity fund Blackstone bought a stake in Titagarh at Rs 672 a share on March 13, ’08, which is at 10 per cent premium over the upper price band.
The company, backed by funds like 2i Capital, ChrysCapital, Blackstone, and JPMorgan is one of the few wagon manufacturers in the private sector, and it expects to ride on the increasing investments in railways and the entry of private freight train operators. Titagarh is raising money to set up an electric multiple unit (EMU) manufacturing facility and expand its existing wagon facilities.
What analysts say?
The Economic Times says: The investors can subscribe to the IPO at the cut-off price. It believes the issue is priced cheaper. “At the offer price, the stock looks cheaper compared to its closest peer, Texmaco, which is trading at 27 times its trailing four quarter earnings. Along with reasonable valuations, the company offers good growth prospects, as Indian Railways’ freight capacity is estimated to grow at over 10 per cent per annum till FY12.” According to ET, the Railways will invest in more wagons to maintain its freight share vis-à-vis roads.
The Hindu Business Line says: Investments with a two-three year perspective can be considered. They also suggest an investment at cut-off price. It says Railways’ plans to procure an all-time high of about 20,000 wagons for the coming year will benefit companies like Titagarh Wagons.
