Background

Omaxe is an established player in real estate sector with presence mainly in Northern India. The company has executed lot of prestigious projects in NCR region.

 Objects of the Issue

Omaxe, which has a presence in 30 cities and nine states, intends to deploy proceeds worth Rs 500 crore for payments related to land, Rs 236 crore towards repayment of loan and Rs 699 crore for meeting development and construction costs of some of its projects.
The issue would constitute 11.20 per cent of the fully diluted post-issue paid-up capital of the company, if the green shoe option is exercised and 10.30 per cent, if the option is not exercised. Of the total equity float, up to 1.75 crores equity shares are for the public, while the balance 2.96 lakh shares are reserved for eligible employees of the company. Additionally, there would be a green shoe option of 17.5 lakh equity shares.

 Industry Overview

Omaxe is an excellent issue, in terms of valuations and it being a well-known brand in the market. Ethics of this company's management is very good which is needed in this kind of industry. Real estate sector is also in a boom.  Other players like DLF, Unitech, Parsvnath etc are doing well.

The total land bank owned by the company is 3,255 acres including land of 571 acres acquired under joint development and 2,684 acres of its own for which the company has complete ownership or have entered into development agreement. Total developable area is about 183.83 million sq. ft. As at 31-03-07 the total saleable area under development is about 149.82 million sq. ft. Major presence of the company is mainly into tier II and tier III cities like Ajmer, Bhiwadi and Jaipur in Rajasthan and at Agra, Greater Noida, Lucknow, Mathura – Vrindavan and Noida in U.P.

Also, the company’s presence in SEZ is quite low when compared with Parsvanath, which has 24 SEZ with area of over 165 millions sq. ft. The company has received in principle permission from Board of Approvals, GoI for a multi-product SEZ in Rajasthan to be spread over 15,000 acres.

The concern on execution capability of the company would always remain. However, in view of huge land bank at its command with expected market cap of Rs 5,500 crore, the investment appears safe and rewarding in the short to medium term.

Financials and Valuations

At Rs 310 per share, the market capitalization of the company works out at Rs 5,410 crore. The company can very well be compared with Parsvanath Developers and HDIL which are also mild size realty companies

For the year ended 31st Mar07, the company has achieved a turnover of INR 1,431 crores with Net profit of INR 257 crores. The book value of company stands at approx. INR 30. At an EPS of INR 16.60 it translates into PE of 18.70 which is attractive compared to its peers. Most of the comparable companies in the real estate sector are trading at PE of 25+ which leaves good upside for the investors

Background

The Central Bank of India was founded on December 21, 1911, by Sir Sorabji Pochkhanawala with Sir Pherozesha Mehta as Chairman. The Bank was nationalised in 1969 along with 13 other major commercial banks

The public sector institution, the Central Bank of India (the “Bank”) is entering the capital market with an Initial Public Offering (IPO) of 80,000,000 Equity Shares of Rs 10 each (“Equity Shares”) for cash (the “Issue”) at a price to be decided through a 100% book building process. The Price Band for the Issue, which opens for subscription on July 24, 2007, and closes on July 27, 2007, has been fixed between Rs 85 per Equity Share and Rs 102 per Equity Share. After the Issue, the shareholding of the Government of India in the Bank will come down to 80.20%.

Objects of the Issue

The Issue proceeds will be utilized to augment the capital base of the Bank to meet the future capital requirements arising out of the implementation of the Basel II standards and the growth in assets, primarily the loan and investment portfolio due to the growth of the Indian economy and for other general corporate purposes

Industry overview

The global economy witnessed a strong growth in 2004, stimulated by a historically unique period of strong monetary and fiscal measures. The combination of a strong capex investment cycle, consumer finance boom, the subsequent higher take off of credit and increased penetration of fee based and third party products, like banc assurance and mutual funds, saw the incremental non-food credit rise many a fold. Hence, a rising interest rate environment, with its concomitant impact on treasury income, was offset by the rise in both, net interest margins and the core interest income and fee income of banks. This, combined with historically low NPAs, strong provisioning and capitalisation, with low valuations in terms of Price to book value, have made Indian public and private banks very attractive to global investors. With interest rate cycle near its peak and ability of banks to pass on increase in interest rate to customers, banking stocks are expected to continue their gains & outperform the market.

The Bank, currently wholly-owned by the Government of India., is focussing on three main areas: corporate; retail and agriculture. The Bank has given considerable thrust to lending to the priority sector, including the agriculture sector. The Bank also offers a wide range of fee-based services to its customers, including credit cards, debit cards, collection services, cash management and remittance services. It also distributes third party life and non-life insurance policies and mutual funds on an agency basis. As at March 31, 2007, the Bank had a workforce of 39,055 employees serving over 25 million customers.

Financials and Valuations

During FY06, CBI’s advances increased by 37.4% to Rs. 37,484 crores as on March 31, 2006 from Rs.27, 277 crores as on March 31, 2005. Investments of CBI declined from Rs.30, 835 crores as on March 31, 2005 to Rs.28,639 crores as on March 31, 2006. Deposits of CBI have risen during FY 06 by 9.4% and were at Rs.66, 483 crores as on March 31, 2006.  During FY06, CBI concentrated on mobilizing low cost deposits, which resulted in 17.6% (Y-o-Y) growth in those deposits. As a result proportion of low cost deposits increased to 46.8% as on March 31, 2006 from 43.6% as on March 31, 2005. This has helped CBI to reduce its cost of deposits to 4.5% for FY06 as compared to 4.6% for FY05. During FY06, CBI had issued subordinated bonds of Rs.578.20 crores to augment its capital funds. 
Gross NPAs ratio improved to 6.9% as on March 31, 2006 as compared to 9.0% as on March 31, 2005. Net NPAs ratio also marginally improved to 2.6% as on March 31, 2006 from 2.9% as on March 31, 2005.
 In FY06, total income of CBI has reduced by 3.4% (Y-o-Y) to Rs.5, 917 crores and PAT reduced by 27.9% (Y-o-Y) to Rs.257 crores. This is primarily due to decline in non-interest income on account of reduction in profit on sale of investments. ROTA has declined to 0.3% for FY06 from 0.6% for FY05. As on March 31, 2006, Capital Adequacy Ratio (CAR) was 11.0%.
PAT has increased by 99.1% on YoY basis during H1-FY07 as compared to H1-FY06. Total Deposits of the bank increased by 14.7 % to Rs.76221 crores as on September 30, 2006. Advances have surged to Rs.43, 245 crores as on September 30, 2006. CAR stood at 11.5 % as on September 30, 2006.
Maintaining quality of assets, ability to increase fee based income and shore up capital adequacy to meet the growth in risk weighted assets would remain key rating sensitivities.

The Issue has been rated by the Credit Analysis and Research (CARE) as CARE IPO 4 which indicates the above average fundamentals.

We recommend ‘Outperformer’ rating on the stock for both short term and long term investors. Investors should subscribe to this issue since it is attractively priced compared to its Peers.