Despite the weak sentiments, Speciality Restaurants has priced its initial public offer (IPO) at valuations way above those of the broader markets. Should you invest?


Despite the weak sentiments, Speciality Restaurants has priced its initial public offer (IPO) at valuations way above those of the broader markets. Based on annualised earnings of nine months ended December 2011, the issue is priced between 33.6-35.7 times on the post-IPO capital. Even assuming a 30 per cent rise in earnings in the current financial year, the price to earnings valuation at 27 is far from cheap and leaves little on the table for investors in the near-term.

However, the company's track record has been good and long-term prospects are equally bright given rising incomes, growing aspirations of Indian people and acceptability of Chinese food in India.



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