Subscribe to Electrosteel Steels IPO: Angel Broking

MUMBAI: Angel Broking has advised investors to ‘Subscribe’ to initial public offering of Electrosteel Steels with a long-term perspective.

“At the lower and upper band of Rs 10–11, ESL trades at 1.0x FY2010 and 1.1xFY2010 P/BV, which is at a significant discount of 50–60%, given that its peers are trading in the range of 2.0x–2.8x FY2010 P/BV.

We believe ESL’s IPO holds value for long-term investors on account of the a) progressive commissioning of the greenfield steel plant from October 2010, b) raw-material linkage and captive power to support margins and c) technical tie-ups to aid operations at initial stages. Hence, we recommend Subscribe to the IPO with a long-term perspective,” the IPO note said.

ESL plans to raise up to Rs 226–248 crore via an IPO at the lower and upper price band of Rs 10–11, respectively, implying a fresh issue of 22.6cr, assuming the greenshoe option (3.4cr shares) is not exercised. If the greenshoe option is exercised, then ESL can raise up to Rs 259-285 crore at the lower and upper price-band of Rs 10–11, respectively.

The company recently completed a pre-IPO placement of 8.7 crore equity shares to GPC Mauritius II LLC and 5.6 crore equity shares to Franklin Templeton Private Equity Strategy – A/c PMS at a price of Rs 10.75 per share, raising Rs 154 crore.

The issue closes Friday.