Tarapur Transformer has entered the capital market on 26^th April 10, with a public issue of 85 lakh equity shares of Rs.10 each, in the band of Rs.65 to Rs.75 per share.

The compay is engaged in making Transformers with installed capacity of 1839 MVA and repairing of 1,800 MVA per annum. Despite the company having three plants, its level of activity has remained quite low. For FY09, the total income of the company was at Rs.24 crores with PAT at Rs.2.15 crores resulting in an EPS of Rs.2.15. Even for 9 months ending Dec.09 it had a total income of Rs.22.88 crores but PAT fell to Rs.1.55 crores resulting in an annualised EPS of Re.1.88. On a networth of Rs.21.28 crores as at Dec.09 its total debt at Rs.18.90 crores and sundry debtors of Rs.13 crores and inventories of Rs.7.77 crores are matter of concern. Why a company partly engaged in repairing of transformers should have such a huge debt and current assets?

Now company has chalked out an expansion and diversification programme of about Rs.70 crores, of which Rs.25 crores is for acquisition for diversification. No detail of the same has been given. This looks too general and not very convincing.

The company issuing shares at lower band of Rs.65 per share, translate into a PE multiple of 35 times while at the upper band, it works out at 40 times. Even annualised topline is multiplied by over 5 times. There are many established players in Transformer making available with PE multiple of close to 15 times, with topline in excess of Rs.500 crores.

So better to give it a pass as it is too expensive an issue from too tiny a company in the sector.