Prakash Constrowell: Book profits immediately

Prakash Constrowell, which came out with an IPO to raise Rs 60 core for meeting working capital requirements, the purchase of construction equipments and investment in subsidiaries, was listed on the bourses on 4th Oct, 2011. The issue, which offered 46.10 lakh equity shares, was oversubscribed by 2.21x. Here, the retail participation was higher, and the retail portion of the issue was oversubscribed by 4.68x. The non-institutional part was oversubscribed by 2.76x, and QIB was undersubscribed at 0.31x.

At the time of the IPO, we had recommended that investors avoid the issue on account of higher valuations as compared to its larger peers. Even on the FY12 basis earning, the scrip was available at 13.83x on the lower price band of Rs 130 (EPS of Rs 9.40). The issue price was Rs 138 (higher price band).

The scrip witnessed a good opening on the bourses, where it opened at Rs 145 on the BSE, showing an increase of 5%. It suddenly witnessed a downward movement and made an intra-day low of Rs 112.50. However, after touching the low, it only moved northward and touched a new high of Rs 245 then to close at Rs 230. The closing price shows a gain of 67% over the issue price.

Now, investors might be confused about what to do next, as the scrip has moved up briskly. We still recommend that investors avoid the scrip, as the price rise has made it even more expensive on the valuation front. The CMP of Rs 230 discounts its FY12E earnings by 24.40x. This is much higher than that of Unity Infra Projects and Pratibha Industries, which are trading at 3.25x and 5.80x respectively on their FY11 earnings. It is quite surprising how a new company like Prakash Constrowell can enjoy such rich valuations, when the much larger and efficient infrastructure players are available at lower valuations.

Further, the scrip has witnessed too much activity on the bourses, with 2.45 crore shares being traded in a single day. This is almost double the total equity base of just 1.28 crore shares, which clearly indicates that it involves a high amount of speculative trade. Hence, we, at DSIJ, recommend that those who have not entered the stock should avoid the same, and those who have entered and are in profits should book profits on an immediate basis.

Recommendation	Sell
Price Band	Rs 130-138
Issue Price	Rs 130
Shares Offered	46 lakh equity shares
Oversubscribed
Total (x)	2.21
QIB (x)	0.31
Non-Institutional (x)	2.76
Retail Investors (x)	4.68
Listing Price	Rs 145
CMP	Rs 230
BSE Code	533605
Percentage Gain/(Loss) on Listing	5%
Percentage Gain/(Loss) at CMP	67%
Date of Listing	4-Oct-11