Sanghvi Forging and Engineering: Final Oversubscription 1.3x; HNI 1.8x; Retail 2.9x

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SANGHVI FORGING AND ENGINEERING LTD

Total Issue Size	4612525
Total Bids Received	5996900
Total Bids Received at Cut-off Price	4602570
No. of times issue is subscribed	1.30

Sr.No.	Category	No.of shares offered/reserved	No. of shares bid for	No. of times of total meant for the category
1	Qualified Institutional Buyers (QIBs)	2306262	0	0.00
1(a)	Foreign Institutional Investors (FIIs)		0
1(b)	Domestic Financial Institutions(Banks/ Financial Institutions(FIs)/ Insurance Companies)		0
1(c)	Mutual Funds		0
1(d)	Others		0
2	Non Institutional Investors	691879	1260280	1.82
2(a)	Corporates		551110
2(b)	Individuals (Other than RIIs)		709170
2(c)	Others		0
3	Retail Individual Investors (RIIs)	1614384	4736620	2.93
3(a)	Cut Off		4602570
3(b)	Price Bids		134050

Updated as on 09 May 2011 at 1700 hrs

Sanghavi Forging and Engineering Ltd. - IPO Note "Avoid"- Ajcon Global Services

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Investment view

Gujarat based SFEL is engaged in manufacturing and exporting of forging products for the non-automotive sector. It has an installed capacity of 3,600 MTPA for manufacturing of forged flanges and precision machined components (with single piece forging up to 4 MT) in the area of open and closed die forgings catering to various user industries like Oil and Gas, Power, Ship Building and Aerospace.  The key factor in its forging business is the vendor/consultant approval, given the critical end use of the product. The company, in the last few years, has been successful in obtaining various such approvals in both the domestic and international markets. The company has diversified client base with top 10 clients accounting for 38% of revenues in FY10 and has good client relationship worldwide resulting in repeat business from its clients. The company has made Pre-IPO placement of 0.69mn equity shares of Rs. 10/- each fully paid up at premium of Rs.70/- aggregating to Rs.55.9mn to Dango & Dienenthal Maschinenbau GMBH KG, Germany.

At the upper band of the issue price, SFEL is valued at 27x its 9MFY11 annualized earnings of Rs. 3.1/share (post issue).However, we believe the company faces concerns like a)  modest scale of operations, b) high working capital intensity, c) project risk marked by project size of around six times of its networth as on December 31, 2010 and more than four times of its existing capacity, d) exposure to raw material price fluctuation risk and foreign exchange fluctuation risk, e) expensive valuations as compared to peers in the non automotive forging space, f)post issue market capitalization of Rs.1.08bn as compared to issue size of Rs.369mn, inspite of higher PE multiple.

With due consideration to the above factors, we believe that premium valuations are not justified and recommend investors to “AVOID” the issue. 

SANGHVI FORGING AND ENGINEERING IPO: Prospectus, Application Forms, ABSA and rating reports

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SANGHVI FORGING AND ENGINEERING LTD
Symbol - Series	SFEL EQ
Issue Period	May 04, 2011 to May 09, 2011[* For QIB bidders Issue closes on May 06, 2011]
Post issue Modification Period	May 10,2011
Issue Size	Public Issue Of (*) Equity Shares of Rs. 10/- each aggregating to Rs. 3690.02 Lacs
Issue Type	100% Book Building
Price Range	Rs.80 to Rs.85
Face Value	Rs.10/-
Tick Size	Re. 1/-
Market Lot	70 Equity Shares
Minimum Order Quantity	70 Equity Shares
IPO Grading	IPO GRADE 3
Rating Agency	CARE
Maximum Subscription Amount for Retail Investor	Rs.200000
IPO Market Timings	10.00 a.m. to 5.00 p.m.
Book Running Lead Manager	Arihant capital markets ltd
Syndicate Member	Arihant Capital Markets Limited,Khandwala Securities Limited and Prabhudas Lilladher Pvt. Ltd
Categories	FI,IC,MF,FII,OTH,CO,IND,and NOH
No. of Cities with Bidding Centers	56
Name of the registrar	Bigshare Services Private Limited
Address of the registrar	E/2, Ansa Industrial Esatte,Saki Vihar Road,Andheri (E),Mumbai-400072
Contact person name number and Email id	Mr. Ashok Shetty, Telephone 22 28470652/40430200 Fax No.: 22 28475207,Email: sanghvi@bigshareonline.com
Prospectus	Click Here
Trading Member List	Click Here
Application Forms	Click Here
ASBA e-form link	e-Forms
Grading Report	Click Here

Sanghvi Forging and Engineering: All you need to know

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Issue Terms
Issue price / Floor Price (Rs)	80-85
Application per share (Rs)	80.00

Issue Date and Size
Issue opens	04-May-11
Issue closes	09-May-11
Listing on	BSE, NSE
Issue size (Rs cr)	36.90

Lead Managers & Registrar
Lead Manager(1)	Arihant Capital Markets Ltd
E-mail	amol.kshirsagar@arihantcapital.com
Registrar	Bigshare Services Private Limited
E-mail	info@bigshareonline.com

Company Contact Details
Company's address	224/6-7, GIDC Industrial Estate, Waghodia, Vadodara, Gujarat
Pincode	391 760
Tel No.	91 2668 263020
Fax No.	91 2668 263411
Website	http://www.sanghviforge.com

Description
It is a manufacturer and exporter of forging products for the non-automotive sector

Objects of Issue
-To Part finance the cost of setting up 15,000 MTPA open die forging unit -To meet the requirement of margin money for working capital for the New Project. -To meet the pre-operative expenses including Issue expenses.