The ₹308.88-crore initial public offering (IPO) of Vishnu Prakash R Punglia opened for subscription today, August 24 and will close on August 28. The company has set the price band of the issue in the range of ₹94-99.
About the issue: The issue is entirely a fresh offering of up to 3.12 crore equity shares.
Lot size: Investors can bid for a minimum of 150 shares in one lot and in multiples thereafter. One lot of shares would cost retail investors ₹14,850.
Reservation: The company has reserved 50 percent of equity shares for qualified institutional bidders, while non-institutional investors will have 15 percent of reservation for them. The remaining 35 percent shares will go to the retail investors of the company.
Objective: Net proceeds from the issue shall be utilised towards funding capital expenditure requirements for the purchase of equipment and machinery, the working capital requirements of the company and general corporate purposes. The company is giving a discount of ₹9 per share to its eligible employees.
Subscription status: The issue received a stellar response from investors and was fully subscribed within a few hours of opening. By 12:30 PM on Day 1 of bidding, the issue had been subscribed to 1.42 times. The retail investor portion was bid 2.10 times while NII part was subscribed to 1.80 times. However, the quota for QIBs has not received any subscription till this time.
GMP: Shares of Vishnu Prakash R Punglia Limited are available at a premium of ₹65 per equity share in the grey market. It has risen from ₹40 yesterday.
Anchor investors: Ahead of the issue, the company raised ₹91.77 crore by allocating 92.7 lakh shares at ₹99 apiece to 13 anchor investors. Quant Mutual Fund, Max Life Insurance, Kotak Mahindra Life Insurance, Societe Generale, Minerva Emerging Opportunities Fund, Copthall Mauritius Investment, and BNP Paribas Arbitrage participated in the anchor book.
About the firm: Incorporated in 1986, Jodhpur-based Vishnu Prakash R Punglia is an ISO 9001:2015 certified integrated engineering, procurement, and construction (EPC) enterprise. It is engaged in the business of designing and constructing infrastructure projects for the central and state governments, autonomous bodies, and private bodies across nine states and one union territory in India. The company is mainly focused on water supply projects (WSPs) which constitute 78 percent of its outstanding order book. It is also present in projects related to railways, roads, and irrigation. Rajasthan constitutes the largest share in its order book at 62 percent. As of July 15, 2023, VPRP has an order book of ₹3,800 crore which is 3.3x its FY23 revenue of ₹1,168 crore.
Financials: The company's topline has grown consistently for the past 3 years at a CAGR of 55 percent while EBITDA witnessed an 86 percent CAGR growth over FY21-23. Its EBITDA margins also improved from 9.3 percent in FY21 to 13.4 percent in FY23.
The company's net profit has doubled for FY23 to ₹90.6 crore from ₹44.8 crore in FY22, aided by solid execution and operational efficiency.
Its return ratios, such as RoE and RoCE also remained healthy at 24 percent and 25 percent (3-year average), respectively, over FY21-23 and have an improving debt-to-equity ratio of 0.8x in FY23 from 1.1x in FY22.
Book running managers: Choice Capital Advisors and Pantomath Capital Advisors are the book-running lead managers and Link Intime India has been appointed as the registrar to the issue.
Important dates: The tentative date for finalisation of the share allotment is August 31, 2023. Meanwhile, it is likely to be listed on the bourses on September 5.
What brokerages say:
Most brokerages recommended subscribing to the stock on the back of a healthy order book, industry tailwinds, a track record of strong growth, and attractive valuations for the investors. However, dependency on government projects and increasing competition are some key challenges for the firm.
Geojit Financial Services: Subscribe
At the upper price band of ₹99, VPRPL is available at a P/E of 13.6x (FY23), which appears to be fairly priced compared to its peers. The consistent topline growth and operational efficiencies, experience of over three decades in the industry, strong support from government orders, healthy order pipeline, and new initiatives from Govt. of India to boost the sector will position the company well for growth. We assign a "Subscribe" rating for the issue on a short to medium-term basis.
Nirmal Bang: Subscribe
VPRP’s niche focus on WSP (Water Supply Projects), low revenue base, and demonstrated track record of high growth with margin expansion along with reasonable valuations make the issue attractive compared to listed peers. With strong industry tailwinds likely to persist in water-related projects, railways, and roads, we believe VPRP is a decent proxy play on the infrastructure industry offering high growth with good profitability. Thus we recommend subscribing to the IPO.
Anand Rathi: Subscribe - Long Term
At the upper price band, the company is valuing at a P/E of 13x with a market cap of ₹1,233.9 crore post issue of equity shares and a return on net worth of 38.3 percent. As of July’23, VPRPL had 51 ongoing projects with total work awarded amounting to ₹6,183 crore, of which ₹2,384 crore worth of work has been executed and the remaining work amounting to ₹3,799.53 crore constitutes the order book. Therefore, such a healthy order book and industry tailwinds are expected to record strong profitability in the coming years. On the valuation front, we believe that the company is fairly priced. Thus, we recommend a 'Subscribe – Long Term' rating to the IPO.
Reliance Securities: Subscribe
On FY23 financials, the IPO is valued at 10.2 times P/E, 9 times EV/EBITDA and 1.2 times EV/Sales. It has gradually increased its capabilities in terms of the size of projects executed. The infrastructure sector, which is a crucial driver for the Indian economy, is likely to provide several growth opportunities to the company. Moreover, with the Union budget 2023-23, the company stands to benefit from various government initiatives in infrastructure, water waste management, road and highway industry. In view of diversified business verticals, strong financials, multiple growth opportunities, and a healthy order book, we recommend a 'subscribe' to the issue.
Swastika Investmart: Subscribe
Vishnu Prakash is a well-known construction company that is primarily engaged in infrastructure projects for the central and state governments. The company is focused on water supply projects and is benefiting from various government initiatives. It has a track record of successfully completing projects and has achieved notable growth through a robust order book. The company also has an in-house integrated model that helps it to successfully implement its projects. However, as it is in the construction industry, it faces stiff competition and high working capital requirements. Despite these challenges, the IPO is coming at a fair valuation (P/E) of 9.5 times. Our overall outlook on the infrastructure sector is bullish. Thus we recommend a subscribe rating to the issue.
