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Review By MLR Securities Private Ltd on April 28, 2011
Issue Date: 27th to 29th April
Price Band: INR 27 to 29
Issue Size: INR 600 mn
Mcap: INR 1239 mn
Public Holding: 48.86% (Post Issue)
IPO Grading: ICRA IPO Grade 2
BRLM: Keynote
Servalakshmi Paper Ltd (SPL) is promoted by the Tamil Nadu based Servall Group. Servall Group is into the production of paper, paper producing machinery and consultancy for turnkey projects in paper industry.
SPL was incorporated in Nov05, however the commercial production started in Apr10. The company manufactures PWP (printing & writing paper) and NP (newsprint). The production plant is in Tamil Nadu and has a capacity of 90,000 TPA. The company is also has a captive co-generation power plant with a capacity of 15 MW.
Investment Rationale
At the average of the price band (INR 28.5) the stock is valued at 1.2 x post issue book value of INR 23 while larger and established players in the industry like BILT, TN News Print, etc are trading close to book value. Although the paper mill has a total production capacity of 90,000 tonnes per annum and ranks within fifteen major plants in India we believe that the IPO is over priced at 1.2 x BV (post issue) and recommend avoiding this issue.
Review By MLR Securities Private Ltd on April 28, 2011
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