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IPO News
Subscribe to VA Tech Wabag IPO at lower price band - Elara Capital
Posted On : 2010-09-23 10:59:39( TIMEZONE : IST )
- VA Tech Wabag
- Recommendation: Subscribe (At lower price band)
- Price band: INR1,230 – INR1,310
- Issue size: INR1.25bn
- Opening date: 22 September 2010
- Closing date: 27 September 2010
VA Tech Wabag Ltd (VTWL) plans to float an IPO consisting of a fresh issue and an offer for sale at the price band of INR1,230 – INR1,310 per share, raising INR1.25bn through an issue of 1.02mn and 0.95mn shares at the lower and upper bands respectively. Post the offer, the promoter's stake in VTWL will fall to ~33.2% - 33.4% (depending upon the price discovery process) from the current 37.45%. The object of the offer is to fund the company's working capital requirement amounting to INR592mn, investment of INR347mn towards construction of a corporate office at Chennai (to be completed by FY13) and INR111mn towards implementation of global IT systems.
Company background
VTWL was incorporated in 1995, promoted as subsidiary of a German company called Balcke-Durr Aktiengesellschaft, which was held by Deutsche Babcock, to design and construct cooling towers water treatment plants. In 1999, VA Tech, an Austrian Group acquired the water business of Deutsche Babcock and demerged the Indian operations of the acquired company. Consequently, in 2000, fresh incorporation of the demerged entity named VTWL was granted. Further in Aug'06, the majority shareholding was acquired from Wabag Austria by India Advantage Funds – I, represented by ICICI Venture Funds (12.7%) and individual promoters, namely, Rajiv Mittal (20.1%), Amit Sengupta (5.1%), Shiv Narayan Saraf (4.6%) and S. Varadarajan (4.6%).
Key Strengths
Strong order growth - The consolidated order book stands at INR27.4bn, of which the standalone entity contributes INR18.6bn as on July'10.
Valuation & Recommendation
VTWL presently boasts of a strong order backlog worth INR27.4bn split in a ratio of 2:1 across its core domestic and international businesses, offering revenue visibility over the next 30 months. In addition, the company stands in fray to bag incremental orders worth INR12-15bn, clarity on which should emerge in subsequent quarters. VTWL has exhibited a commendable ~42% revenue and 126% net profits CAGR over the past three years on a consolidated basis. This was despite a muted earnings performance by the international business (majorly Wabag Austria), which had been in doldrums particularly over the past 15 months or so.
