Gujarat Pipavav Port - Dock At This Port

Gujarat Pipavav Port (GPPL) is exclusive developer and operator of 'APM Terminals Pipavav' port at Gujarat is taping the capital market to raise Rs 500 crore. The price band is fixed at Rs 42-48. At lower price band it will issue 11.92 crore of equity shares and at higher price band it will be 10.42 crore equity shares. Apart from this, there is offer for sale of 1.17 crore equity shares by existing shareholders. The money so raised will be utilized for repayment of debt (Rs 300 crore) and other capital expenditure.

Business Segment:
GPPL, which operates in three business segments, i.e. container cargo service, bulk cargo service and LPG cargo service, is India’s first private sector port. In container cargo APM Terminal Pipavav has capacity to accommodate container vessels of 6200 TEUs capacity. In Bulk cargo it can handle 5 mn tonnes of bulk of cargo every year and major cargo handled are coal, fertilisers and minerals. LPG cargo that was closed from last two years due to relocation of LPG cargo jetty is again available since April 2010. Currently it handles only a single customer.

Financial Performance and Valuation:
Coming down to company’s financials, in five years ending December 2009 (Company follows calendar year as financial year) total income of the company has grown by 29.5 per cent CAGR and was Rs 219.1 crore for CY2009. The Company is yet to post profit till now and its losses has widened to Rs 117 crore from Rs 52.55 crore in the same duration. When we talk of the valuation, we find that important 'E' earning is missing to calculate the PE ratio. Nonetheless, we will compare with other valuation matrix. When we take market cap to sales on CY10 sales and expanded equity at lower price band, it is coming to 8.3 times compared to more than 20 times of Mundra Port and SEZ. Even we calculate EV/Sales, we find GPPL at attractive rate of little less than five times, compared to nine times of Mundra Port and SEZ. The reason for such cheap offer may be due to lower EBIDTA margins of the company, which is currently at 20.1 per cent compared to Mundra Port and SEZ and more than that company is still incurring losses. Despite this, we ask our readers to invest in lower price band because the amount of discount to its larger player will close down going forward once LPG cargo segment starts contributing revenue and improvement in EBIDTA and profit margins as company will repay Rs 300 crore of debt through this issue.