Public issue of Company X is priced at Rs. 223. The book value of equity is Rs. 76. The current EPS is Rs. 15 and this is likely to rise by 10% next year. Mr. P. wants to invest in IPO using loan which he will get a leverage of 2 times at a finance cost of 15% till the time shares are allotted. Allotment ratio is 5:10. The shares of Company X are expected to list at Rs. 230.

In this scenario, what should be the minimum allotment so that Mr. P. doesn't suffer a loss?

Answer rating: 100% (QA)

SOLUTION IPO price of share Rs 223 Book value of equity Rs 76 Current EPS Rs 15 E... View the full answer