Opto Circuits (India): Below Average

Score: Below Average

BL Research Bureau

THOUGH the company has a fairly satisfactory track record, the offer price of Rs 50 appears to be stiff and may limit the scope for capital appreciation.

But this company and its stock could merit a look for possible investment at a later date once its financials in the post-listing period become clear.

The company operates in an area -- optoelectronics -- where the opportunities for growth are likely to be attractive. The risks are also on the high side as the company is in a line of business where the competition is intense and the technological changes could have a significant bearing on future prospects. How the company manages the latter may also be a key factor with regard to long-term growth.

The retirement of high-cost debt may place the financials on a better footing. The high degree of reliance on a group company in the US for marketing adds to the risks. Close to 90 per cent of the revenues come from the products marketed through the US-based company, Elekon Industries Inc, US.

What the company says: According to the offer document, the following are the significant aspects relating to the operations:

*The company is a 100 per cent export-oriented unit with US as its main market.

*The company is into the manufacture of optoelectronic components and assembles/sub-assemblies.

*Opto Circuits is a listed outfit with US Federal Drug Administration.

*The company depends on imported raw materials and equipment for its proposed project.

*The project cost of Rs 15.50 crore is towards retiring high-cost debt, setting up an office in the UK and expanding its infrastructure capacities.

*It has orders worth Rs 32 crore on hand.

*The sales have risen from Rs 4.92 crore to Rs 18.44 crore in the last five years and the earnings moved up from Rs 0.12 crore to Rs 3.37 crore.

*The equity base is Rs 10.07 crore.

Industry class :Electronic equipment

Issue Type :Equity

Offer Price :Rs 50 per share

Offer Opened :September 29

Offer Closes :October 06

Lead Manager :Karvy Investor Services

Listing :Bangalore, Hyderabad, Mumbai

Project Cost :Rs 15.50 crore

Equity :Rs 10.07 crore