Gujarat Pipavav Port IPO

IPO RECOMMENDATION: GO FOR IT FOR SMALL LISTING GAINS

Gujarat Pipavav Port (GPPL), a developer and operator of APM Terminals Pipavav port, is coming out with its Rs 500 crore public issue on August 23, 2010. Nirmal Bang has recommended subscribing to this IPO.

The price band for the issue, which closes on August 26, is at Rs 42-48/share. GPPL is the developer and operator of APM Terminals Pipavav, which has multi-cargo and multi-user operations. It has the exclusive right to develop and operate APM Terminals Pipavav and related facilities until September 2028 pursuant to the Concession Agreement with GMB and the GoG.

The report says, "We cannot directly compare GPPL with Mundra Port and SEZ Ltd (Mundra) as the company is much smaller and provides limited services as compared to Mundra which has SEZ and other assets. GPPL has a lower margin as compared to Mundra as the company.s utilization rate was lower and it was incurring costs to expand capacity and relocate its LPG cargo ports. Going forward, with the operational efficiency, startup of LPG cargo services and lower debt burden we expect the company.s margin to improve substantially. Looking at the long term growth prospects of the company and scope to expand the margin we recommend to subscribe to this IPO."