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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Engineers India (EIL) FPO

Suresh KP


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