CEBBCO lists at discount; analysts see pick-up

CEBBCO lists at discount; analysts see pick-up

Mumbai: India’s Commercial Engineers & Body Builders Co Ltd (CEBBCO) on Monday listed at a discount, following a tepid response from retail investors, but analysts expect the stock to pick up, mainly on expanding operations in its railway division.

Shares of CEBBCO, which counts Tata Motors as a major customer, opened at a discount of 3.3 % to its issue price of Rs127 on the BSE. It listed at a discount of 6.3 % on the NSE.

“I will be remaining bullish on the stock. There are not many major players dealing with railway wagons as well as commercial vehicles," said Manas Majumdar, analyst at Spa Securities.

CEBBCO’s railway project is expected to go onstream in March 2011, he added.

CEBBCO, which makes locomotive and vehicle bodies, will utilise around Rs803 million of its total IPO proceeds of about Rs1.7 billion to set up a railway project with a manufacturing capacity of 1,200 wagons and 150 coaches.

It had set up the railway division in 2008 to diversify its revenue stream.

The company’s IPO issue was subscribed 2.07 times with a strong institutional subscription making up for a lacklustre reponse from retail and high networth investors.

“CEBBCO is in a business which is not too glamorous. Retail or HNI (investors) do not see the product of this (company) as a brand," as truck or bus bodies normally do not have brand recall among retail investors, said Arun Kejriwal, director at research firm KRIS.

At 1pm. the shares were trading at Rs124.6 on the BSE, still down 1.9 % to its issue price in a weak Mumbai market.

“The shares seem to be holding ground around the issue price. It is not giving all that much of a panic or uncertainty," Kejriwal said adding investors are likely to get more bullish in the mid term once the firm discloses its quarterly results.

CEBBCO’s net profit zoomed to about Rs192 million for the year ending March 2010 compared with Rs14.1 million a year ago. Its total income for the year rose to about Rs1.97 billion from Rs1.17 billion.

As on July 15, its order book in the commercial vehicles division was Rs5.25 billion while the railway division had orders worth Rs981.55 million, a company statement said.