Elara Capital has advised investors to ‘Subscribe’ to the follow-on public offer of Engineers India.

“Our target price of Rs 308 based on the average of the three valuation methodologies adopted indicates a potential upside of ~14% from the lower price band and 6.4% from the higher price band of the issue.

An expected CAGR growth of ~25% in revenues and earnings over FY10-12, robust operating margins at 25% and return ratios in excess of 40% makes EIL a unique & attractive business model.

However, we believe with the known positives largely been factored in the offered issue price, there seems a limited room for upside presently. Hence, we recommend a SUBSCRIBE at the lower price band of the issue,” the report said.

The Government of India plans to dilute 10% stake in Engineers India by way of a FPO consisting of 33.7 million equity shares. The offering, priced at Rs 270 – 290 per share is expected to bring in Rs 9-9.8 billion to government kitty.

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