Virgo Engineers Limited – IPO

by Manshu on January 31, 2008

in IPO/NFO

Business of Virgo Engineers Limited

 

 
Virgo Engineers is in the business of manufacturing automated and manual valves. These valves are used in industries such as oil and gas, manufacturing and process industries for the purpose of flow control. The company was founded in 1987 and the promoters have a rich experience in the industry, the combined experience of the two promoters is about 65 years. Virgo engineers has offices in India, USA, Dubai, UK and Malaysia. The manufacturing facilities are in India and Italy.
Virgo Engineers has about 244 customers and as of November 30 2007 were executing 624 orders in all with an order book of Rs.3776.21 million.

 

 
Financials of Virgo Engineers

 

 
The total income has risen from Rs.537.92 million to Rs. Rs.3105.67 million in the last five years but the significant revenue jump has been from fiscal 2006 to 2007 when the income rose from Rs. 1649.31 million to Rs.3105.67 million.
The profit after tax for Virgo Engineers has also risen well in the last five years from Rs.21.21 million in fiscal 2003 to Rs.487.76 million in the last fiscal. This figure however has substantially grown in the last couple of fiscals from Rs.44.26 million in 2005 to Rs.297.19 million in 2006 and to Rs.487.76 million in the past fiscal.
The EPS for the last fiscal was Rs.5.25 and for fiscal 2006 and fiscal 2005 it was Rs.1.90 and Rs.1.56 respectively. 

 

 
Objective of the Issue

 

 
Virgo Engineers is raising money in order to expand its existing manufacturing facility, set up a manufacturing facility in Coimbatore, prepay certain existing debt and for working capital requirements and to invest in its Italian subsidiary.   

 

 
Key Risks

 

 
The key risks that Virgo Engineers face is that there revenues are concentrated among a few customers such that the top customer contributes 9.13% of the revenues and the top ten contribute 29.81% of the revenues in fiscal 2007. This factor coupled with the competitive nature of the business where there are several vendors who supply the same products and the fact that the customers do not have long term contractual obligation pose a risk to the business.

 

 
Conclusion

 

 
While the company has got a good and healthy order book the financials have only started to increase rapidly especially in the last year or so. In such a scenario the IPO would only merit an attention if the P/E multiples are reasonable and not as high as a regular blue chip may demand.

Leave a Comment

Previous post:

Next post: