Manglam Infra NSE SME IPO review (Apply)

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Review By Dilip Davda on July 19, 2024

•    The company is engaged in consultancy business for infrastructure projects.
•    While it has completed 127 projects, it has 45 ongoing projects.
•    As of May 31, 2024, it had order book of Rs. 78.91 cr. 
•    It marked steady growth in its top and bottom lines for the reported periods. 
•    Investors may park funds in this reasonably priced issue for the medium to long term.

ABOUT COMPANY:
Manglam Infra & Engineering Ltd. (MIEL) is an infrastructure consultancy company, and its core business is providing project management consultancy services which includes detailed project reports (DPRs), Supervision and quality control (SQC), and operation & maintenance (O & M) for Highways/Roads, Bridges, Tunnels, Buildings/Urban development. It undertakes various project independently as well as through Joint ventures and MoUs with other players in this industry. 

As on date of the Red Herring Prospectus, MIEL caters to various state governments of Madhya Pradesh, Jammu & Kashmir, Bihar, Arunachal Pradesh, Jharkhand, Himachal Pradesh, Uttar Pradesh, Manipur, Nagaland, Maharashtra, Assam, Rajasthan, Uttarakhand and Haryana and central government and has completed total 127 projects out of which 116 projects are undertaken on an independent basis and 11 projects are undertaken through Joint ventures and MoUs. 

Currently, it has 45 on-going projects out of which 22 projects are being undertaken on an independent basis and 23 projects are being undertaken through Joint ventures and MoUs. MIEL has a team of more than 300 qualified professionals, with experience ranging between 7 to 15+ years. In alignment with its business requirements, the company also occasionally engages third-party service providers for specific contracts on need basis.

Its Order Book, comprising anticipated revenues from the unexecuted portions of existing contracts (including signed contracts for which all pre-conditions to entry into force has been met and letters of acceptance issued by the client prior to execution of the final contract) as of May 31, 2024, was Rs. 78.91 cr. From FY22 to FY24, MIEL's revenue posted CAGR of 22.98% and Net Profit marked CAGR of 42.53%. As of May 31, 2024, it had 272 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 4932000 equity shares of Rs. 10 each to mobilize Rs. 27.62 cr. at the upper cap. It has announced a price band of Rs. 53 - Rs. 56 per share. The issue opens for subscription on July 24, 2024, and will close on July 26, 2024. The minimum application to be made is for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 28.03% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 19.35 cr. for working capital, and the rest for general corporate purposes. 

The issue is solely lead managed by Unistone Capital Pvt. Ltd., and Bigshare Services Pvt. Ltd. is the registrar to the issue. Giriraj Stock Broking Pvt. Ltd. is the market maker for the company. 

The company has issued/converted initial equity shares at par value. The average cost of acquisition of shares by the promoters is Rs. 10.00 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 12.67 cr. will stand enhanced to Rs. 17.60 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 98.54 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 26.78 cr. / Rs. 3.33 cr. (FY22), Rs. 34.78 cr. / Rs. 5.54 cr. (FY23), Rs. 40.51 cr. / Rs. 6.76 cr. (FY24 - two broken periods). 

For the last three fiscals, it has reported an average EPS of Rs. 5.18, and an average RoNW of 54.10%. The issue is priced at a P/BV of 4.15 based on its NAV of Rs. 13.50 as of March 31, 2024, and at a P/BV of 2.20 based on its post-IPO NAV of Rs. 25.41 per share (at the upper cap). 

If we attribute FY24 earnings to its post-IPO fully diluted paid-up capital, then the asking price is at a P/E of 14.58. Thus the issue appears reasonably priced.

For the reported periods, the company has posted PAT margins of 12.90% (FY22), 16.10% (FY23), 16.81% (FY24), and RoCE margins of 54.04%, 67.04%, 44.95% respectively for the referred periods. 

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Rudrabhishek Enterprises as their listed peer. It is trading at a P/E of 21.3 (as of July 19, 2024). However, they are not comparable on an apple-to-apple basis.

MERCHANT BANKER'S TRACK RECORD:
This is the 17th mandate (8 Main Board and 9 SME) from Unistone Capital in the last four fiscals (including the ongoing one), out of the last 10 listings, all listed with premiums ranging from 3.57% to 125.93% on the date of listing.

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