EIL Launches Its FPO Today, Open For Subscription For Three Days

Engineers India (EIL) is said to raise around Rs. 500 crore through the FPO route which hits the capital markets today. The government plans to sell 3.36 crore EIL shares and also reserve 5% of the offer for employees. A retail discount and employee discount of Rs. 6 is being offered to Retail Individual Bidders and Eligible Employees bidding in the Retail Portion and Employee Reservation Portion, respectively at the time of making the bid. The offer will constitute 10% of the paid up Equity Share capital of the company and the Net Offer will constitute 9.85% of the paid up Equity Share capital of the company. The government has set a price range of Rs. 145-150 a share for the sale.

EIL's order book as on September 2013, was Rs. 3232 crore, while the order inflow for the nine-month period ended 31 December, 2013 was Rs. 1850 crore. EIL Chairman and Managing Director, A K Purwaha said while addressing the press conference, "Our order book as of September, 2013 was Rs 3,232 crore. In addition, we have been awarded several contracts."

Commenting further, he said, "We intend to leverage our engineering consultancy, EPC capabilities to selectively diversify into other potential project segments as part of our strategic initiatives for enhanced growth and diversification. We have operation in various international geographies such as the Middle East, North Africa and South East Asia and we continue to focus on further expansion of our international business."

If we compare the current FPO with the FPO which was launched three years back, the price band for the same was Rs. 270-290 with a double digit discount along with retail discount. This made the previous issue very attractive. Commenting on this,the company officials said, "At the lower end of the band, it is still a very attractive buy for the retail investors. The share was trading at a very attractive price in the last FPO. The way the things have been, EIL FPO has taken an entire process of an year, so there has been a hangover of the market price on the FPO. We have not looked only at the current market price while fixing this band and looking at the overall size of the issue, the company's fundamentals and that it is an engineering consultancy company, it is an essential buy. Looking at all these factors, the government thought that this would be an ideal price band for the company."

Coming to the financial performance of the company, the total income from operations for the quarter ended 31 December, 2013 came in at Rs. 420.39 crore as compared to Rs. 604.76 crore in the corresponding quarter last year, down 30.5%. The total expenses for the quarter stood at Rs. 324.22 crore as against Rs.476.07 crore in the same quarter last year. The company registered net profit of Rs. 135 crore in the quarter ended 31 December,2013 as compared to Rs. 132.33 crore in the corresponding quarter last fiscal, showing a minor growth of 1.98%.

The Capex plans for the company is roughly around Rs. 150-250 crore. The company also has a consistent EBITDA growth of 20%. We would recommend the investors to go ahead with this offer only if they wish to purchase it on discount.