MEP Infrastructure Developers (MEP), a leading player in tolling operations in the road infrastructure sector, with a pan-India presence has opened its initial public offer (IPO) of Rs 3.24 billion for subscription today.

The Mumbai-based toll management company has fixed price band of the issue at Rs 63-65 a share. The public issue will close on April 23.

As on Mar. 19, 2015, MEP operates 18 toll collection projects with an aggregate of 33 toll plazas, five OMT projects covering 2,530 lane kilometres with an aggregate of 15 toll plazas and one BOT project covering 42 lane kilometres with five toll plazas.

Commenting on the above, ICICIdirect said 'Though MEP's revenue has increased 3.6x during FY10-14, it has been making consecutive losses during the same period mainly on account of higher interest cost. There are few breaches in covenants in financing agreements, outstanding litigation against company, promoter related to income tax, and few qualification made by Joint Statutory Auditors related to delay in payments of taxes, repayments of loans, depositing provident fund etc.

We also remain cautious regarding related party transaction. At upper price of Rs  65, stock is valued at 12.4x FY15E EV/EBITDA, which appears to be rich considering its weak fundamentals. In fact, the leading road players such as IRB and ITNL trade at 9.3x and 11.0x FY15E EV/EBITDA, respectively. Hence, we recommend investors to avoid subscribing to MEP's IPO.''

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