Money Tree

The salient features and extracts from the Red Herring Prospectus of the issue are given hereunder:

Issue Opens On : July 10, 2007
Issue Closes On : July 13, 2007
Issue Size : 30,00,000 Equity shares
Face Value : Rs.10/-
Price Range : Rs. 170 to Rs. 185/-
Issue Type : Book Building
Tick Size : Re.1/-
Market Lot : 30
Minimum Order Qty : 30
Listing Stock Exchange : NSE, BSE

Objects Of the Issue :

To meet Long Term Working Capital Requirement;
To acquire Plant & Machineries
To Invest in Subsidiary For Purchase of Design and Technology for Semi and Fully Automated Multi Level Car Parking
Systems, for Development of Designs and Setting up of Fabrication Unit and for meeting the expenses of Marketing and Promotion of Parking Systems.
To Meet the Public Issue Expenses
For General Corporate Purposes

Basis for Issue Price :

Face Value : Rs.10/-
Issue Price : 17 Times(Lower Price Band) of the Face Value.
Issue Price : 18.5 Times(Higher Price Band) of the Face Value.
Issue Price : Rs. 170 to Rs. 185
EPS for the last financial year 2006-07 : Rs 15.47
EPS for the last year 2005-2006 : Rs 10.06
EPS for the financial year 2004-05 : Rs. 5.16
Weighted Average EPS for the years April 2004- March 2007 : Rs 11.95

Industry PE ratio:

Highest (Mahindra Gesco) : 173.00
Lowest (Lok Housing) : 2.40
Industry Composite : 32.40

PE ratio of Simplex Projects on the higher side of price band comes out to 14.23 times and on the lower side of the price band comes out to 15.48 times on the basis of weighted average EPS for the last three years.

PE ratio of the Peer Group

Patel Engineering : 23.40
Unity Infra : 15.7
Subhash Projects : 15.9
Era Construction :8.3
Tantia Construction : 14.5

Industry Overview :

Infrastructure development in India has set off in a major way in the last two years and is witnessing impressive growth across various segments. A recent study indicates that India would be merely scratching the surface of the potential infrastructure opportunity with US$ 191.51 billion of investments committed over the next five years. The sector is estimated to grow at a CAGR of 15 per cent over the next few years.

In India, construction is the second largest economic activity after agriculture. The investment in constructionaccounts for nearly 11 per cent of India’s Gross Domestic Product (GDP) and nearly 50 per cent of its Gross Fixed Capital Formation (GFCF). It accounts for nearly 65 per cent of the total investment in infrastructure and is expected to be the biggest beneficiary of the surge in infrastructure investment over the next five years. The investment in this segment over the financial year 2005 to 2010 is estimated at US$ 124.65 billion.

Business Overview :

The Company is an ISO 9001:2000 certified construction company and it provides integrated engineering, procurement and construction services for civil & Structural construction and infrastructure sector projects. The main focus area of the company includes:
Piling and Foundations
Civil construction projects, which include structures such as commercial and residential complexes, mass housing projects, townships, industrial structures
Transportation engineering projects including bridges, flyovers, underpasses, road projects Irrigation, Water supply and Sewarage Schemes.
Installation and operation of Multi Level Car Parking Systems

History :

The Company was incorporated as Simplex Projects Limited under the Companies Act, 1956 on 31st October, 1990 in the state of West Bengal with its Registered Office situated at 12/1, Nellie Sengupta Sarani, Kolkata- 700087. The Certificate of Commencement of Business was obtained on 6th December, 1990 and the operations were started in the year 1992.

The Company was initially promoted by Late Mr. Madhodas Mundhra along with his three sons viz. Mr. Bithaldas Mundhra, Mr. Shreemohandas Mundhra and Mr. Balkrishandas Mundhra in the year 1990 as part of the Simplex Group with Simplex Concrete Piles (India) Limited (Currently known as Simplex Infrastructures Limited) as the flagship of the Group. The Company started business by taking projects on subcontract basis from Simplex Concrete
Piles (India) Limited (Currently known as Simplex Infrastructures Limited) and moved further by taking contracts directly.

Financial Information :

Total income of the Company for the year ended 31st March, 2007 : Rs. 13624.26 lacs
Total income of the Company for the year ended 31st March, 2006 : Rs. 8257.96 lacs
Total income of the Company for the year ended 31st March, 2005 : Rs. 7138.26 lacs

Net profit (after tax) for the year ended 31st March, 2007 : Rs.1049.21 lacs
Net profit (after Tax) for the year ended 31st March, 2006 : Rs. 381.45 lacs
Net profit (after Tax) for the year ended 31st March, 2005 : Rs. 183.00 lacs

Comments :

As far as pricing is concerned, the issue is not very cheap valued near its listed peers. The company is placed in a good space and is expected to ride the ongoing infrastructure boom in India which is going to stay for some time. The Company’s growth in terms of revenue and profits has been consistent in the past few years and with a strong order book the company is expected to grow at a rapid pace. We recommend subscription to the issue.