Bajaj Corp : IPO

I missed this IPO. I am not much an IPO fan at the same time I like to keep an eye on bargains.
I feel that this IPO was worth my opportunity fund risk. Lets see why!

Good:

• Brand test: What image comes to mind when someone whispers 'hair oil'. Dabur Or Parachute Or Bajaj Almond drop? Well I see there is a big tie here but how many will know that Marico manufactures Parachute. Anyway both the names are justified; Bajaj has little more than 50% market share of hair oil market.
  
• Product test: Bajaj is mostly into hair oils. It has other notorious but almost extinct product "Kala Dant manjan'. Hair care products majorly need a prestige in the market and that's what Bajaj Corp already has.
• Management test: I haven't dug much about the management but I trust Bajaj is a good management.
• Financial status test: During FY10 topline grew by 35% and similar was the trend in bottom line. Companies profit margin is at 25%, which is quite good as compare to Dabur or Marico. Bajaj Corp has wisely chosen its manufacture units in tax free zones. It will enjoy no excise duty for 10 years and no income tax for 5 years from 2009. After this period too it will enjoy good concession. (A good way to achieve margin for an FMCG company). Company's balance sheet is quite strong and it has enough cash to fund future growth.
  

Bad:

• Only one category: Bajaj corp has leadership in only on category of the product. In fact it has only one product to offer. If suddenly any other company does something better and cheap, the whole company will have to bear the brunt.

Valuation:

On the lower side at 630, it is valued at 21.3 PE and on the higher side at 660, it is valued at 22.3 PE. While its direct competitor are trading at 27 (Marico) & 31 (Dabur). Since Bajaj is a good brand name, it is quite likely that this will easily trade at 27 to 31 PE. In any case there is a small upside expected when the IPO opens.