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Engineers India (EIL) FPO of Feb-2014 – Should you invest?

Engineers India (EIL) FPO of Feb-2014 - Should you investEngineers India (EIL) FPO of Feb-2014 - Should you investEngineers India (EIL) FPO of Feb-2014 – Should you invest?

Engineers India Limited (EIL) FPO would hit the market on 6th February, 2014. Engineers India FPO has a price band of Rs 145 to Rs 150 per share to subscribe. This Follow-on-Public Offer (FPO) would be open for 3 days for subscription. If you are getting tempted to invest in Engineers India (EIL) FPO, please read this analysis before taking the investment decision.

About Engineers India Limited FPO

  • Engineers India Limited (EIL) is miniratna of Govt. of India. Govt of India plans to dis-invest Rs 40,000 Crores in this fiscal year.
  • Engineers India Limited (EIL) FPO is expected to fetch Rs 500 Crores.
  • Govt of India currently holds 80.4% in this EIL. It’s current FPO is to sell 3.36 L shares.
  • Price band of this FPO is fixed at Rs 145 to Rs 150 per share.
  • Opens for subscription from 6th Feburary, 2014 and closes on 10th February, 2014

How is Engineers India Limited doing in terms of Financials?

Here is the summary of revenues:

  • 2010-11 – Rs 2,987 Crores
  • 2011-12 – Rs 3,936 Crores
  • 2010-13 – Rs 2,773 Crores
  • H11-2013-14- Rs 1,038 Crores

It’s profits are indicated below:

  • 2010-11 – Rs 522 Crores
  • 2011-12 – Rs 644 Crores
  • 2010-13 – Rs 576 Crores
  • H11-2013-14- Rs 221 Crores

Profit Margins:

  • 2010-11 – 17%
  • 2011-12 – 16%
  • 2010-13 – 21%
  • H11-2013-14- 21%

Figures and percentages are rounded off

Reasons to invest in Engineers India Limited (EIL) FPO

  • Govt of India miniratna company
  • Currently EIL is a cash rich company with zero debt
  • Last year it has offered a dividend of Rs 6. Its current market price is Rs 149 which translates to 4% dividend.

Reasons NOT to invest in Engineers India Limited (EIL) FPO

  • Its revenues are falling year on year.
  • Its profits are in declining mode
  • Current market price is less than Rs 150. During FPO time, its price can still fall further. It would be high risk to invest at Rs 145-Rs 150 (and Rs 6 discount for retail investors) as shares are expected to be available at lower price in open share market.
  • Engineers India FPO of Jul-2010 was issued at Rs 290. Means current issue price is 50% fallen. If the stock price has already fallen 50% in last 3 years, it is not best investment option and has no hopes to create wealth for investors in the future.

Conclusion: Engineers India Limited (EIL) FPO looks attractive on the face of it. However, considering all negative points, I do not have any specific reason to subscribe to this FPO. Investors should think twice before investing in such FPO’s. Personally, I would not be subscribing to this FPO.

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Suresh
Engineers India (EIL) FPO

The Author

Suresh KP

Suresh KP i.e. me have written 1,500+ articles on this blog. I love doing analysis on various Best Investment Plans like mutual funds, Stocks, IPO's, NCD Bonds, Insurance products. If you like our blog, you can share some of the good articles on your Facebook or Twitter. This would be the BIGGEST gift which you would be giving to us.

6 Comments

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  1. Suresh, EIL is up and we have missed an opportunity. What is your outlook on EIL now? 

    1. Punit, My view would not change though EIL is up. 

  2. "Engineers India FPO of Jul-2010 was issued at Rs. 290. Means current issue price is 50% fallen"

     

    Have you considered the BONUS / SPLIT when you make such statements ?

    1. Hi DK, Bonus shares were issued prior to Jul-2010 and share price has already considered to that effect. Pls let me know in case you see any disconnect. Since you expressed it, I rechecked and found that data is correct.

  3. I think that EIL is very good company but market point of view ,investement in EIL FPO has some risk.

  4. I think you have elucidated strong points not to invest to FPO of EIL.

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