The Prestige Estates Project, a real estate company from the South of India has started taking subscription for its initial public offering or IPO. As per reports released by KR Choskey one should not invest in their IPO.

The firm has plans to collect a sum of twelve hundred crores of rupees from the offering and the price band set for the issue ranges from one hundred and seventy two rupees to one hundred eighty three rupees per share.

Anchor investors have already given their commitments of giving two hundred and fifteen decimal four six crores of rupees to the company against one crore seventeen lakhs seventy three thousand seven hundred and seventy equity shares at one hundred and eighty three rupees per share.

As per the report of KR Choskey the company has debts in the tune of one thousand six hundred and one decimal five crores of rupees as of March 2010.

The ratio of its debt and equity is very high, in the tune of one decimal five x and this has resulted in a high interest expenses for the company. Choskey apprehends that all these will give less profit to the company.

Choskey hade highlighted some points to back up their advice of not subscribing the issue. They firstly pointed out that the firm has considerable amount of exposure to the commercial segments, secondly it is mostly restricted in southern India, and thirdly it has a balance sheet which is highly leveraged.

The stock on its upper price band of one hundred and eighty three rupees is valued higher than the average price seen in the industry which is 2x .It is having a value of three decimal zero six x.

The Bangalore based company has plans to use the proceeds from the offering for investing in its running projects. It also plans to buy land and repay debt from the raised fund.