M and B Switchgears Limited which had tapped the capital markets with its issue for 50 lac shares in a price band of Rs 180 to 186 was subscribed. The issue had opened on Wednesday the 28th of September and closed on Wednesday the 5th of October. The issue is being made to fund a solar power project of 4MW which the company is setting up. The company would be raising Rs 93 crs at the upper end of the price band. The issue was subscribed 1.57 times and received support from all the categories of investors.
This company is currently in the business of making transformers and is based out of Indore. The company has a turnover of Rs 34 crs in the year ended March 2011. The net profir of the company for the same period was Rs 77.48 lacs. The company has a pre-IPO equity of 1.5 cr shares which seems surprising for such a small company and limited turnover. The post-IPO equity capital rises to 2 cr shares and the market capitalisation at the upper end of the price band a staggering Rs 372 crs. The price earnings ratio at this price is a mind boggling 480 times. I do not remember seeing, hearing or being able to recall a profit making company entering the capital markets with such a demanding price earning multiple. It is indeed challenging and makes a test on the ability of investors to digest the issue and one need sheer courage to invest in such an issue.
The details of the subscription level in various categories are given below: –
| Category | Shares Offered | Shares Subscribed | Times |
| QIB | 2500000 | 2569320 | 1.03 |
| NII | 750000 | 1167960 | 1.56 |
| Retail | 1750000 | 4106430 | 2.35 |
| Overall | 5000000 | 7843710 | 1.57 |
The company chose to have a road show and it is during attending the same that one got lot of insights about what is likely to happen in the company. The merchant banker is M/s D & A Financial Services Private Limited who before this issue has brought issues like Brooks Laboratories Limited and Shilpi Cable Technologies Limited. The price performance of both these issues on listing days and thereafter is in public domain for all to know.
The solar power project is good and has a bright future but only for the promoters and not for the investors who are providing all the capital. The maxim “ BUYER BEWARE” is most apt for this issue which has been subscribed to by “friendly” intermediaries.
