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CARE has assigned 'CARE IPO Grade 2' to the proposed initial public offer of Austral Coke & Projects Ltd, which indicates below average fundamentals.
Austral Coke plans an IPO of 100 lakh equity shares of face value Rs 10 each for which the price band is yet to be decided.
The grading is constrained by Austral Coke's relatively small size of operations, unorganised and highly competitive industry in which the company operates, cyclicality in steel industry, high dependence on the issue proceeds for the proposed expansion plans, moderate corporate governance practices and low professional management.
The grading is also constrained by risks associated with proposed deployment of funds from the IPO in setting up new manufacturing units.
However, the grading factors in promoters' experience in setting up coke manufacturing plant, favourable industry scenario for LAM coke and power, proposed backward integration in form of coal mine acquisition by group company, comfortable gearing levels, and improvement in technology for expansion projects.
The IPO proceeds will be deployed for expansion of existing manufacturing facilities, setting up a new coke manufacturing plant plus captive power plant at Sindhudurg alongwith prepayment of high cost debt and acquisition of coal mines.
Backed by increased demand for the equipments from the infrastructure sector, the equipment hiring segment along with coke, textile and refractory division, aided Austral Coke in posting a compounded growth of 109 per cent in total income over FY04-07.
Despite additional borrowings of Rs 48 crore for capital expenditure during FY06-07, equity infusion to the tune of Rs 63.84 crore resulted in low gearing levels.
In FY07 the company reported net sales of Rs 176 crore and PAT of Rs 9.15 crore on account of increased contribution from coke divisions which further translated into improved RoNW and RoCE. Liquidity ratios of the company throughout remained comfortable above 1.0x. Source : economictimes.indiatimes.com |
