MEP Infrastructure IPO – Should you subscribe to this IPO?

MEP Infrastructure Developers IPOMEP Infrastructure IPO – Should you subscribe to this IPO?

MEP Infrastructure IPO would hit market on 21st April, 2015. This is the 5th IPO in this year. MEP Infrastructure Developers Limited is an established and leading player in tolling operations in the road infrastructure sector. If you are planning to invest in this MEP Infra Developers IPO, you SHOULD read the analysis before making the decision. Should you invest in MEP Infrastructure Developers Limited IPO? What are the risk factors to be considered before you invest in such MEP Infrastructure IPO?

About MEP Infrastructure Developers Limited

MEP Infrastructure Developers is an established leading player in toll operations in the road infrastructure sector, with a pan-India presence. The company focuses on toll collection projects as well as OMT projects, which involve maintenance in addition to toll collection on operational roads constructed by third parties. Company, along with its subsidiaries, has operated 68 projects with an aggregate of 122 toll plazas and 783 lanes across 12 states in the country.

Also Read: How to pick-up high dividend yield stocks for investment for long term?

Issue details of MEP Infrastructure IPO

  • IPO opens: 21-April-2015
  • IPO closes: 23-April-2015
  • Face Value: Rs 10 per share
  • Issue price band: Rs 63-65 per share.
  • Minimum Shares to apply: 225 shares and in multiples of 225 shares thereon.
  • Issue size: Rs 354 Crores
  • Lead Managers: IDBI Capital Market Services Limited
  • Listing: BSE / NSE

Download MEP Infrastructure IPO Prospectus from MC website here

Purpose of the IPO

The funds would be used for the following purposes.

  • Repayment / pre-payment, in full or part, of certain loans availed by our Subsidiary, MIPL; and
  • General corporate purposes.

Company Financials (consolidated)

  • Company generated revenue of Rs 329.12 Crores for the year ended Mar-10 and Rs 1,240 Crores for the year ended Mar-14.  It earned revenue of Rs  1,141.51 Crores for 7 months ended Oct-14.
  • Company posted a LOSS of Rs 1.27 Crores for the year ended Mar-10 and a LOSS of Rs 121.41 Crores for the year ended Mar-2014. Its Loss is Rs  97.30 Crores for 7 months ended Oct-2014.
  • EPS is negative as the company is incurring losses (Consolidated level).

MEP Infrastructure IPO - Financials

Reasons to invest MEP Infrastructure Developers Limited Limited IPO

  • Good revenue growth story in last 5 years. It multiplied its revenue by 4 times in last 5 years.

Reasons not to invest in MEP Infrastructure Developers Limited Limited IPO

  • Govt. of India is doing away with toll collections. Hence, future revenues are not predictable and are at risk.
  • Consolidated numbers show that company is incurring losses in last 5 years. Investors would not get any money by way of profits.
  • There are outstanding legal proceedings alleging criminal negligence against one of its Subsidiaries.
  • Derive a substantial portion of revenue from the Mumbai Entry Points Project. Termination of / or reduction in revenue from, the Mumbai Entry Points Project could have a material adverse effect on this business, results of operation and financial condition.
  • Most of the company long-term projects are held through its Subsidiaries and are subject to restrictions (with respect to disposition of shares held by us in such Subsidiaries which are implementing the projects), and we are liable for acts done by such Subsidiaries until such projects achieve their commercial operation date.
  • It derives substantial portion of total revenue on a consolidated basis from Short Term projects which are terminable unilaterally by the authorities without assigning any reason.
  • Other risk factors can be viewed at prospectus Page no. 17 onwards.

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Recommendation / Investment strategy

  • Consolidated EPS shows negative for last 3 years, hence asking price of Rs 63 to Rs 65 is not viable for a loss making company.
  • MEP Infrastructure IPO has several negative factors. It has been incurring losses in last 5 years, revenues are at risky with new Govt. policies etc., are major negative factors.
  • Considering all these negative factors, investors should be cautious and stay away from such IPO’s.

Disclaimer: I would not be investing in this IPO. The idea of giving positive and negative factors to investors in this article is to create awareness and education about this IPO. One should NOT constitute this as investment advice to buy or not to buy. Please consult your investment advisor before you invest in such high risk investment options.

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MEP Infrastructure IPO – Should you subscribe to this IPO


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