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Market Watch: choosing these IPOs

business Updated: Jul 25, 2007 02:38 IST
Udayan Mukherjee

The last few initial public offerings have listed well. Retail investors and traders, if not leveraged big individual investors, have made some money. The level of oversubscription indicates there is a lot of interest in IPO investing again. As many as five are open this week, some quite interesting. There is money to be made here.

Central Bank seems an easy decision. It is a good quality mid-sized public sector bank. Generally, this space has outperformed recently, so sentiment is positive. For most mid-sized state-owned banks the call is a valuation one. At the higher end of 102, the stock would come at a price to adjusted book (P/ABV) of 1.25 and a 2007-08 price-earnings multiple of 7.

That seems reasonable enough and one can certainly play for a 20 per cent upside post listing. This stock could go the Indian Bank way. IVR Prime is the bigger one. The upper end of the price band here at Rs 600 broadly coincides with the stock's net asset value.

While the promoter group has proven credentials in the construction business, the real estate business has to take off post 2007-08. While it is not a bad bet and will probably go on to trade at a premium, there is more margin of safety at the lower end of the band. The management could have chosen to leave a bit more on the table, like Omaxe did.

There are two small ones as well. Asian Granito and Refex Refrigerants. Asian Granito is a vanilla tiles manufacturer. On the 2007-08 expected earnings per share of Rs 17-18 it is coming at a price earnings multiple of under 6, just a bit lower than listed peers like Nitco or Euro Ceramics. From Rs 102, only a very modest upside can be justified.

Refex is in a more interesting space: refrigerant gases. It does not have too many peers other than Navin Fluorine and is a nice niche play. At 20 times 2007-08 earnings, it may look a bit expensive for an IPO but there seems to be appetite for such stories. It is a mixed bag then from the primary market this week, but a couple of them do deserve your attention.

(The writer is Executive Editor, CNBC-TV 18)