Mundra Port IPO subscribed over 7 times

[praveen]

The initial public offer (IPO) of Adani group-promoted Mundra Port and Special Economic Zone Ltd (MPSEZL) on Monday got subscribed over seven times on the third day of the issue.

The issue received bids for 30.01 crore shares against the 4.02 crore shares on offer, latest data available on the exchanges show. The price band for the issue has been fixed between Rs 400 to Rs 440. The offer would close on November 7.

MPSEZL is the first company from SEZ and port sector to hit the capital market. The proceeds of the issue would be utilized for further development of Mundra Port and SEZ.

The company is planning to raise about Rs 1,700 crore to part-fund the construction and development of basic infrastructure and allied facilities in the proposed SEZ and construction and development of south basin terminal for coal and other cargo at Mundra Port, among others.

Proceeds of the IPO would also be utilised in part-funding Adani Petronet (Dahej) Port Private Ltd, Adani Logistic Ltd and investments in Inland Container Private Ltd.

MPSEZL, the developer and operator of Mundra Port, located in Kutch district of Gujarat, is primarily engaged in providing bulk cargo services, container cargo, crude oil cargo and value-added port services, including railway services between Mundra Port and Adipur.

Meanwhile, the IPO of the other firm Empee Distilleries Limited got fully subscribed on the third day of its issue.

The price band of the issue has been fixed at Rs 350 to Rs 400. The offer would close on November 6. Through this IPO, the company proposes to raise between Rs 162 crore and Rs 190 crore

[dkishore]

Mundra Port and SEZ (MPSEZ)

Mundra Port and Special Economic Zone (MPSEZ) is one of leading non-captive private sector port in India, providing services for bulk cargo, container cargo, crude oil cargo, value added port services, including rail services. MPSEZ has developed access to rail, road and pipeline network across India, which has helped it tie up strategic arrangement with customers.

Objects of the Issue
MPSEZ proposes to fund its new initiatives Viz the proposed SEZ at Mundra, coal terminal project, Dahej terminal and container train, and ICD venture through a mix of debt and equity. Total fund requirement for these projects is around 3160 Cr. & Net proceeds to be raised from the issue is around Rs. 1600-1760 Cr.

Object of the Issue:-
Particular Cost
Construction and development of basic Infrastructure and the allied facilities in the proposed SEZ at Mundra ("SEZ project") (700.0 crs)
Construction and development of a terminal for coal and other cargo in the vicinity of power projects at Mundra Port ('Coal Terminal Project") (2000.0 crs)
Contribution towards Investment in Adani Petronet (Dahej) Port Private limited (APPPL) (209.4 crs)
Contribution towards investment in Adani logistics limited ("ALL") (22.0 crs)
Contribution towards investment in Inland Conware Private Limited ("ICPL") (54.38 crs)
General Corporate Purpose (.)

Investment Positives
Strong Growth in Indian Port to continue
Indian Merchandise export and import has registered healthy double digit growth on back of port traffic which has grown at a CAGR of 8.7%, reaching 436 million tones in 06-07. The growth momentum is expected to continue. Momentum of growth is expected to continue on to reach 980 million tones by 2001-12 (CAGR of 12%)

Huge Investment to be made in Port sector
Govt. of India is in the process of implementing the NMDP (National maritime Development programme that will envisage an investment of Rs. 6030 Cr. by FY14. This is done in view of the infrastructure bottleneck faced by ports and rapid growth in trade.

Port-based multi product SEZ
MPSEZ has received approval as a developer of a multi product SEZ port and its surrounding area. Currently, it possesses 15,665 acres of land. MPSEZ will be the master developer of the SEZ and the plans to work with third-party developers to offer services such as power generation, distribution, water supply and telecommunication. To leverage the captive cargo from the port and SEZ, MPSEZ is also venturing into running container rains and setting up of ICD's across India.

MPSEZ: - A diversified Profile
MPSEZ is among the leading non captive private sector ports in India and enjoys the natural and location advantage, including a deep water draft ranging from 15-32 meters that helps it service larger vessels like Very Large Crude Carriers (VLCCs) and container vessels of over 8000 TEUs. It provides services for bulk cargo, container cargo, crude cargo, value-added port service which includes rail services.

o Capacity Expansion
MPSEZ is expanding capacity for handling bulk cargo by constructing a bulk terminal with a min. capacity of 20 million tones. The number of berth is expected to go up from four currently to eight in FY08. It is also constructing a container terminal to increase its container handling capacity from 1.25 mn TEUs to 2.5 mn TEUs by FY08.
o Coal and Other cargo terminal
MPSEZ has signed a port services agreement with coastal Gujarat power, to provide cargo-handling services for a 4000 MW UMPP at Mundra. The terminal is expected to have a capacity of 20 mn tones per annum. Further, Adani power is also setting up an 2640 MW imported coal based power project at Mundra Port.
o Solid Cargo Port Terminal (SCPT) at (Dahej)
MPSEZ is planning to acquire a 74% stake in Adani Petronet port, a JV company with Petronet LNG, to develop a solid cargo port terminal at Dahej in a phased manner, to have capacity of 15 mn tones of cargo. It is expected to serve inland region of south Gujarat, upper Maharashtra and parts of central India.

Risk Concern:-
High capital Investment=long gestation period
MPSEZ's various projects are highly capital intensive Viz., SEZ, container terminal II, Solid cargo port terminal (dahej), Coal Terminal, Container train business etc. Any delay or adverse competitive pressure on any of these projects could impact the company's performance.
Unfavorable Govt. policies
MPSEZ operates its businesses as concessions from various govt. and quasi govt. organization like Gujarat Maritime Board. Cancellation, termination or non-renewal of such agreement could impact MPSEZ's business.

Valuation
MPSEZ has experienced a healthy volume CAGR of 55% during FY04-FY07, to reach 19.3 mn tones. This is reflected in the strong financial performance as operational income of the company has shown a sharp growth from Rs. 167 Cr. in FY04 to Rs. 580 Cr. in FY07. With the strong capacity expansion through setting up of bulk, container, coal and cargo terminals, we expect revenue to boost in coming years.

MPSEZ is expanding capacity for handling bulk cargo by constructing a bulk terminal with a min. capacity of 20 million tones. The issue is priced in the band of Rs 400-440. EPS for FY07 is Rs 4.72. At the upper band of Rs 440, it quotes at a trailing FY07 PE of 93 & at lower band of Rs 400 at 84. Growth in earnings in next 2-3 years is looking attractive on back of huge investment in port sector and capacity expansion which makes the valuation attractive. Therefore, considering the valuations and the diversified businesses, we recommend to subscribe to the issue for a long term perspective