Advice on Nectar Lifesciences stock

Nectar Lifesciences came out with its IPO last year. It was priced at Rs 240. The stock is available at roughly 55 per cent of that price at Rs 130-135. Again, this company had come out with a GDR too, about a year back, where it issued optionally convertible debentures with the conversion price of close to Rs 330. So the stock looks grossly undervalued compared to its IPO price and the GDR price.

Given the fact that the company has been reporting strong earnings and good visibility of good earnings in future to take place, this company made EPS of close to Rs 28 for the financial year 2005-06. In the first quarter too, it has shown significant improvement in its topline and bottomline.

This company is undertaking various expansion projects in Baddi in Himachal Pradesh and at Derabassi, where its existing plant is located. So after those projects go on stream, this company is expected to log on much higher revenues and profits.

The company's subsidiary, which is located in Sri Lanka does a decent turnover and makes a profit of close to Rs 35 crore. So given all these factors, this stock trades as a substantial discount to its IPO price, and at Rs 130 with a P/E of 5x and with good visibility of future earnings, this stock looks underpriced.