Mason Infra NSE SME IPO review (May apply)

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Review By Dilip Davda on June 19, 2024

•    The company is engaged in real estate construction and provides related services.
•    It marked growth in its top and bottom lines for the reported periods.
•    The sudden boost in bottom line for 9M-FY24 raises eyebrows.
•    It has ongoing projects worth Rs. 190+ cr. as of March 31, 2024.
•    Based on FY24 super annualized earnings, the issue appears fully priced. 
•    Well-informed investors may park moderate funds for medium term. 

ABOUT COMPANY:
Mason Infratech Ltd. (MIL) is a real estate construction Company providing construction services for Residential as well as Commercial buildings of new and redevelopment projects. It specializes in executing civil contracts. The company is also working on lifestyle projects and high-value standalone buildings. Its team is well-versed in the latest industry practices, ensuring that MIL remains up to date with the technological advancements in construction. 

It understands the unique requirements of each project and tailor its services accordingly. MIL's comprehensive suite of offerings covers the entire project lifecycle, including planning, designing, procurement, construction, and post-construction services. It provides end-to-end construction services for residential buildings ("Residential"), corporate office buildings and buildings for commercial purposes (collectively, "Commercial"). 

Its capabilities include constructing concrete building structures as well as composite steel structures. The company also provides mechanical, electrical, and plumbing ("MEP") and finishing works. Its primary operational focus lies within the Mumbai Metropolitan Region (MMR). As a construction Company, it is establishing long-term partnerships with clients. The company leverages its technical expertise, staying up to date with the industry trends and best practices. It is committed to fulfil client expectations, embracing new technologies.  As of December 31, 2023, it had 161 employees on its payroll. As of March 31, 2024, it had ongoing projects worth Rs. 190.21 cr.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 4760000 equity shares of Rs. 10 each to mobilize Rs. 30.46 cr. at the upper cap. It has announced a price band of Rs. 62 - Rs. 64 per share. The issue opens for subscription on June 24, 2024, and will close on June 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 27.09% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 19.00 cr. for working capital, and the rest for general corporate purposes. 

The issue is solely lead managed by Expert Global Consultants Pvt. Ltd., and KFin Technologies Ltd. is the registrar to the issue. Globalworth Securities Ltd. is the market maker for the company. 

Having issued/converted initial equity shares at par value, the company issued further equity shares at a fixed price of Rs. 40 per share in January 2024. It has also issued bonus shares in the ratio of 1 for 4 in January 2024. The average cost of acquisition of shares by the promoters is Rs. 8.00. 

Post-IPO, company's current paid-up equity capital of Rs. 12.81 cr. will stand enhanced to Rs. 17.57 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 112.46 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 3.50 cr. / Rs. 0.08 cr. (FY21), Rs. 30.11 cr. / Rs. 1.52 cr. (FY22), and Rs. 64.06 cr. /Rs. 3.37 cr. (FY23). For 9M of FY24 ended on December 31, 2023, it earned a net profit of Rs. 5.09 cr. on a total income of Rs. 56.91 cr. The quantum jump in bottom line for 9M -FY24 raises eyebrows and concern over its sustainability.

For the last three fiscals, it has reported an average EPS of Rs. 1.76, and an average RoNW of 44.39%. The issue is priced at a P/BV of 6.87 based on its NAV of Rs. 9.32 as of December 31, 2023. The IPO price band ad is missing post-IPO NAV data. 

If we attribute annualized FY24 super earnings to its post-IPO fully diluted paid-up capital, then the asking price is at a P/E of 16.58.  Thus the issue appears fully priced. 

For the reported periods, the company has posted PAT margins of 2.25% (FY21), 5.05% (FY22), 5.28% (FY23), 8.97% (9M-FY24), and RoCE margins of - (18.53) %, 37.28%, 35.73%, 30.98% 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 Capacite Infra, and Atal Realtech as their listed peers. They are trading at a P/E of 22.5, and 30.4 (as of June 19, 2024). However, they are not comparable on an apple-to-apple basis.

MERCHANT BANKER'S TRACK RECORD:
This is the 10th mandate from Expert Global in the last three fiscals, out of the last 8 listings, 1 opened at discount, 1 at par and the rest with premiums ranging from 10.47% to 90% on the date of listing. 

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