Thejo Engineering IPO Review by KM Global (Avoid)

Review By K.M. Global Financial Services Ltd on September 5, 2012

Issue Period: September 4th-6th
Issue Price (Rs): 402-430
Issue Size (Rs Cr): 19.0
Mcap (Rs Cr): 69-72
Listing: NSE Emerge
Promoters: Mr. K.J. Joseph and Mr. Thomas John
BRLM: IDBI Capital Market Services Ltd

Thejo Engineering is an Engineering Solutions provider catering to the core sector Industries like mining, power, steel, cement, ports, fertilizers etc. Their product portfolio covers design, manufacture and supply of engineering products for Bulk Material Handling, Mineral Processing and Corrosion Protection while their services include belt conveyor maintenance
and operations. Thejo is a pioneer in the cold vulcanizing process in India and has a large market share in its products.

Strengths & Expansion Plans

Global Diversification - Thejo is currently supplying to the Australian mining industry. It is looking to expand further in Australia and build a presence in Africa, Brazil and the Middle East.
Low Debt and Improving Margins - The company's EBITDA margins rose by 2% over the last year. It has little long term debt on its books while working capital needs are high.

Risks

Industry Headwinds - Thejo caters to the core sector which is facing severe macro headwinds. The Indian investment climate is expected to remain subdued for the foreseeable future while the Australian mining sector might also weaken due to slowing Chinese growth.

Conclusion / Investment Strategy

We recommend that investors avoid subscribing to Thejo Engineering's IPO as they can buy larger listed peers at a cheaper valuation. The company's growth prospects are uncertain due to severe headwinds faced by India's core sector coupled with slowing growth in China.

Reviewer recommends Avoid to the issue.