The initial public offering (IPO) of Udayshivakumar Infra Ltd was subscribed 58% on Day 1. The public issue that opened for subscription on Monday, March 20, will close on Thursday, March 23.
The company has fixed the price band at ₹33 to 35 per equity share for the proposed initial public offer.
Investors can bid for a minimum of 428 equity shares and in multiples thereafter.
The public offering, which has a face value of ₹10 per equity share, consists of a fresh issue of ₹66 crore. There is no offer-for-sale (OFS) part of the offer.
According to the company's Draft Red Herring Prospectus (DRHP), the net proceeds from the issue will be utilised towards funding incremental working capital requirements of the company, and general corporate purposes.
About 60% of the offer is reserved for retail investors, while 30% is put aside for non-institutional investors. 10% of the issue is set aside for qualified institutional buyers.
The equity shares are proposed to be listed on BSE and NSE.
What do brokerages say?
BP Equities Pvt Ltd
According to the brokerage, the company plans to build on its experience going forward and continue to pursue bigger irrigation, roads, and bridge projects judiciously, both on its own and in collaboration with other parties. The company seeks to further develop its in-house competencies by extending into various functional aspects of projects. By doing so, it will eliminate dependence on third parties to avoid risks and minimise costs related to these functions, which has been an essential component of growth over the years.
The company's profit after taxes (PAT) margin and profits before interest, taxes, depreciation, and amortisation (EBITDA) margin have both shown an improvement in recent years.
"However, the company carries concentration risk as it is primarily focused on the State of Karnataka and there has been no meaningful growth in revenues over the past few years. At the upper end of the price band, the issue is valued at a price-to-earnings (P/E) of 11x based on FY2022 earnings which we feel is reasonable. Hence, we recommend a 'subscribe' rating for the benefit of listing gains," said the brokerage.
Swastika Investmart Ltd
The company has a robust order book, excellent execution skills, and industry experience, according to the brokerage's report. The company has reported a mixed bag of financial results over the past three years. The company's dependence on a small number of clients, particularly government initiatives, and its limited geographic scope make it risky.
"The IPO is coming at a P/E valuation of 10.51, which is fairly priced. So, finally, our view on the overall sector is bullish, but as this particular offer is very small in size, we will recommend only high-risk investors to 'Subscribe' this IPO," added the brokerage.
Dilip Davda
"The company posted inconsistencies in its top and bottom lines for the reported periods. It has an order book of ₹1,290 crore, as of December 31, 2022. Rising goods and services tax (GST) recovery from government bodies raises concern. Based on its FY23 annualised earnings, the issue appears fully priced. The initial listing in the T group may curtail speculative moves. Well-informed/cash surplus investors may consider parking funds for the long term," said the contributing editor at Chittorgarh.com.
