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IPO Trail: PE-Backed Ashoka Buildcon, Electrosteel Integrated In Queue

20 September, 2010

IDFC Private Equity’s four-year-old investment of Rs 100 crore in infrastructure developer Ashoka Buildcon could be valued at 2.3x at the upper end of the IPO price band of the construction firm. Ashoka Buildcon is looking to raise Rs 225 crore ($49 million) through an IPO and IDFC PE’s holding would come down from 15.62% currently to 13.4%, post issue.

Even after the equity dilution, IDFC PE would continue to remain the single largest (entity) equity holder of the company. The promoter group, through various individuals and investment entities, would hold around 73% in the company after the IPO.

At the issue price band of Rs 297-324, the company will be valued at Rs 1,580-1,723 crore. At the upper end of the price band, IDFC PE’s stake will be valued at Rs 231 crore($50 million). IDFC had invested around Rs 100 crore in the firm in August 2006.

IDFC-SSKI and Enam Securities are the book running lead managers (BRLM) and Motilal Oswal Investment Advisors is the co-BRLM to the issue.

The issue would be closely watched as it would be one of the few mid-sized IPOs in the construction space after the market crashed and then bounced back over the last two years. Many issues have done well in line with positive vibes in the secondary market where the benchmark indices are closing on their all time highs recorded in January’08.

Ashoka Buildcon, which is primarily into construction of roads and bridges, had reported steady income generation in the year ended March 2009. With total revenues increasing over 50% to Rs 518 crore, it sailed through the downturn quite comfortably. Although it did not face serious erosion of profits like the other more volatile real estate developers, its net profit growth slipped 5% to Rs 34.8 crore for 2008-09 against a 36% jump the previous year.

Another firm that has announced the IPO price band is Electrosteel Integrated, which is backed by a number of financial investors including IL&FS and IFCI, is looking to raise Rs 368-400 crore through a public float. The company has priced its issue (which also has a greenshoe option) at a price band of Rs 10-11, the price at which it has allotted shares to all investors over the last one year.

The company is promoted by Electrosteel Castings which owns 42%. Post issue, it will get diluted to around 34%. Another large shareholder in the company is international steel firm Stemcor that owns 24%.

At the price band Electrosteel Integrated is eyeing a market cap of around Rs 2,050 crore which will be more than that of Electrosteel Castings (Rs 1,574 crore). The IPO is largely (Rs 250 crore) to part finance the construction of an integrated steel and D.I. pipe plant having a capacity of 2.2 MTPA in the state of Jharkhand. Some of the money (Rs 22 crore) will also be used as margin money towards bank guarantees besides other purposes.

Among the key investors, IFCI has invested Rs 100 crore and IL&FS and its managed funds have together invested more than Rs 100 crore.


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IPO Trail: PE-Backed Ashoka Buildcon, Electrosteel Integrated In Queue

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