Tatasteel fell below Rs. 400 on Friday, as it announced dismal results in 2012. With an EPS of just Rs. 4 for the last quarter of FY 2011-12, and a drop of 42% in full year EPS (Rs. 53.63) compared to the earlier year (Rs. 92.86), the share price doesn't look quite that cheap either.

For the last five years results have been zig zag:

While revenue has recovered after the financial crisis, EPS is just not working out. The Rs. 99 EPS last year was great due to a nice series of restructuring accounting points, which is basically funny money. But obviously that doesn't last. At current prices, the stock trades at a P/E of 8 which is pretty much fair value for a company that sells a commodity.

Oh and that's not counting the massive FCCB payment that is coming in 2014. They had rolled over earlier FCCBs in 2009, so there is an obligation of $1.09 billion coming up in November 2014, or the share price needs to be Rs. 605 or more. That's a 50% gain in the next two years that Tata Steel hopes will happen.

Five years ago, in April 2007,when Tata announced the Corus buyout structure, I wrote a post saying the company was "not worth it". The price then was Rs. 505. Since then there have been Rs. 80 worth dividends (of which the last Rs. 12 is only going to be paid in the months ahead)

Five years, and India's largest steel conglomerate, one that has been hailed internationally, has given NEGATIVE returns on the stock, even including dividends. Five years of nothingness, and I'll soon show that this is actually good - many of the other big guns have just killed themselves.

The Speciality Restaurants Limited IPO has ended, with a 2.54x subscription. Most of that came in from institutions who demanded more than 4.6x what they were allocated. Retail subscriptions were only 55% of theirs.

Did I like the IPO? A quick glance through the docs told me the company wanted Rs. 146 to Rs. 155 per share, for a 11.74 million (1.174 crore) share issue. The post money valuation’s around 700 cr. (7 billion).

The company seems to have earned a net profit of Rs. 15 cr. (Rs. 150 million) in the first nine months of the year, on revenues of 150 cr. (1.5 bn) That puts the pre-money P/E at about 28-30, which can be fairly high in the restaurant business, where net margins are like 10% or so.

Since they have around 80 outlets, and will build about 40 more in the next 3 years, they are valuing each outlet at an average of 6-7 cr (60 to 70 million). That’s a little high, considering their per-restaurant profit is about Rs. 25 lakhs (2.5 million). A fine dining restaurant handles itself for about 3 years at the lower end and 8 years at the upper end – beyond that, it loses its charm. Even if you take a 10 year cash flow, and add a bit in for a liquor license and tables/chairs/equipment, you might only get about 4 cr. (40 million) per restaurant as a valuation. Paying an additional 75% for the brand is crazy.

And then they don’t own their restaurants – they even lease some (many?) from their promoters. The promoters get paid a good sum – over 7 cr. (70 million) as just rent, but overall, they seem to get paid lesser than others. The promoters own competing businesses, and have, in the recent past, got the company to acquire one of the promoters’ restaurant businesses. While the transaction isn’t a problem, the concept of having a promoter as competition isn’t palatable.

Competition comes from everywhere. The aspirational category though doesn’t have too many listings though. (Jubilant Foodworks, a pizza franchisee is one) So there may be a first mover advantage.

While the company shows something good – they did at least go public – the appetite for this kind of IPO in the market will determine future course. The wild success of the Jubilant IPO must have meant that no institution wanted to miss this one – but retail sat out. Would I have bought? No way; too high priced – I’d buy it at a price of Rs. 50 or so. Still, fundamentals are boring; I would still get in if there is a huge breakout with volume, and exit with a stop loss.

With popular request (from Kaushik) I have updated the Market Cap to GDP chart for India.

Market Cap is the total NSE Market Cap at the end of the month, and GDP is known quarterly, so I put it in at the last month of the quarter. At this time, we only know about GDP till Q3 2011-12 (Dec 2011), and the budget assumed about 89 trillion (1 trillion = 1 lakh crore) of 2011-12 GDP so I’ve taken that figure tentatively from March 2012. (Actual GDP figures come out only on 31 May)

We’re not quite at the lows of 2008 and not even as low as we had hit in December (59%). We are though at levels last seen in the troughs of 2008-09 and prior to that, in 2005 when it was an upward trend.

Total market cap as of May 18 was Rs. 56.49 trillion.

Yes, I know, not comparable, but it’s just a context.