Angel maintains AVOID on Birla Cotsyn IPO

Angel maintains AVOID on Birla Cotsyn IPO
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First Published: Mon, Jun 30 2008. 01 27 PM IST

Updated: Mon, Jun 30 2008. 01 27 PM IST
Issue Opens: 30 June
Issue Closes: 4 July
Issue Price: Rs15-18
Part of Yash Birla Group, Birla Cotsyn is primarily engaged in the business of manufacture of synthetic yarn, cotton ginning, pressing and oil expelling at its facilities located at various places in Maharashtra.
It has elaborate plans of expanding its integrated textile project situated at different locations and also has plans to enter the retail along with foraying into garment manufacture.
The company currently derives 25% of its revenues from exports to countries such as Yemen and Turkey. It proposes to start exporting to Europe and America post execution of its expansion programme. It expects exports to contribute 50% of its total revenue going ahead.
However, it would be highly susceptible to forex fluctuations, which could impact its overall profitability.
Valuation
There is a lot of uncertainty attached to the company’s success at least in the near future considering that the Indian textile industry is highly competitive.
Further, its performance is highly susceptible to forex fluctuation as a substantial portion of its revenue is derived from exports.
In view of these risks associated with the company’s ambitious expansion plans, we believe the IPO is aggressively priced, especially considering that relatively bigger and experienced listed peers are available at better and attractive valuations. We recommend an AVOID on the Issue.
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First Published: Mon, Jun 30 2008. 01 27 PM IST
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