Jaypee Infratech IPO

by Manshu on April 29, 2010

in IPO/NFO

There has been a steady flow of IPOs for the last few days, and the next one in line is Jaypee Infratech. This offer opened on 29th and is going to close on the 4th of May. The name of the company tells you a couple of things:

  1. It is part of the Jaypee group.
  2. It is an infrastructure company.

This is a a special purpose company that was incorporated in 2007 to develop, operate and maintain the Yamuna expressway, which connects Noida and Agra. The Yamuna expressway is going to be a 6 lane – 165 kilometer highway, which will have the potential to be expanded into 8 lanes.

Jaypee Infratech will make money out of toll revenue that it will have rights to for 36 years. They are going to develop 6,175 acres of land along the highway at five locations, which will be developed for residential, commercial, amusement, industrial and institutional purposes.

Readers will recognize this is as the Build Operate Transfer (BOT) model popular in India, and the company needs to complete this highway by 2013 based on its agreements. They expect it to be done much earlier though, and the prospectus states that they could be done as early as 2011. They expect to earn toll revenue beginning 2012, but the real estate development part of the company is already getting some cash in.

Jaypee Infratech is getting land allotted to them in five parcels, which they will develop and make money out of as well. They expect half of the allotted land to house residential projects, one third for commercial use, and the rest for toll plazas, and open spaces.  The parcels are of 1,235 acres each, and are located in Noida, Aligarh, Agra, and two in Gautam Budh Nagar.

There is work going on in the Noida parcel, and Jaypee Infratech has five residential and commercial projects planned there. They have already sold 88% of these projects, and the projects themselves are going to get completed by 2013.

Last year the company had revenues of Rs. 5,545.43 million, and net profit of Rs. 2,553.65 million. The EPS for the same period is Rs.2.76, and the price range of the IPO is between Rs. 102 and Rs. 117.

The IPO has been graded 3 out of 5 by both ICRA and CARE, and they give the following rationale for their grades:

  • Experienced promoter team.
  • Significant progress in the development of the highway.
  • Availability of size-able land parcels in Noida and Greater Noida at a relatively low cost.
  • Competition from the existing NH – 2.
  • Competition from existing players in the real – estate market.

One final point about the issue – retail investors are going to get 5% discount on the issue price.

{ 5 comments… read them below or add one }

Abhishek May 1, 2010 at 1:46 am

I can think of 10 equivalent or better listed stocks in the Indian markets. Anyway investing on the basis of future revs looks like gambling.Plus who knows how the project will turn out once BSP gets out of power

Reply

Anurag May 3, 2010 at 10:27 pm

and so… would you invest or not?
😉

Reply

Maulik May 8, 2010 at 7:54 pm

I agree with Abhishek but i would bet future for indian trasportation or commuting businees as this is not selling any product but building most useful model for road and recovery program. I would definately put my money for this IPO. Lets hope it come out good way for us..

Reply

Abhishek May 8, 2010 at 10:52 pm

I would never put my money here . Building roads and transport is essential I agree and has great potential . But investing is differnet from believing in a story.No one can tell me what their real estate valuation is .Plus the lack of disclosure and subjectivity in valuation makes me cringe.I would not even invest at a 20-30% discount since I can’t make anything of the valuation and I don’t have a let’s say high opinion of the mgmt.

Reply

madhusdan sethi May 19, 2010 at 8:37 am

200 share of jaypee infratech was allotted to me. when do I get by my balance money . kindly intimate me early.

Reply

Leave a Comment

Previous post:

Next post: