>JINDAL COTEX LIMITED (ASIT C MEHTA )

Public issue of 12.5 million shares with a face value of INR10 at a price band of INR70-75 aggregating to INR 871.8 million - INR 934 million. The issue is through 100% book building process.

Background
Jindal Cotex manufactures acrylic, polyester and polyester-viscose, and polyester cotton combed and carded yarns. The yarns are used in apparels, hosiery and garments.

Objects of the issue
1) Setting up a new facility for manufacturing of Cotton Yarn, Yarn Dyeing and Garments

2) Investment in subsidiaries:
a) Jindal Medicot Limited;
b) Jindal Specialty Textiles Limited

3) Meeting public issue expenses.

Valuation
In FY09 company had an adjusted EPS of INR 3.5 but on a post issue basis EPS is INR 1.7 which translates into a P/E of 40.3 at the lower band(INR 70) and 43.2 at the higher band(INR75). Majority of the issue proceeds will be used for its subsidiaries which are foraying into “functional textiles”, a very nascent industry. Compared to its peers, like Ambika Cotton and Himachal Fibres the issue appears expensive. Hence we recommend “Avoid” to the issue.

To see full report: JINDAL COTEX LIMITED