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Review By Dilip Davda on April 5, 2024

•    TGL is an engineering construction and development company for infra projects. 
•    It marked inconsistency in its top and bottom lines for FY21 and FY22.
•    The sudden boost in its top and bottom lines raise eyebrows. However, its pending order book worth Rs. 904+ cr. indicates prospects ahead. 
•    Based on FY24 super earnings, the issue appears fully priced. 
•    Investors may park funds for the medium to long term rewards. 

ABOUT COMPANY:
Teerth Gopicon Ltd. (TGL) is an engineering construction and development company engaged primarily in the construction of roads, sewerage work and water distribution work in the Madhya Pradesh. It has also worked as sub-contractor and constructed residential tower in the city of Indore. TGL as corporate has the track record of not more than 5 years.

The company has taken up various work as a registered Civil contractor of various Central/State Government like ISCDL, IMC, USCL, UMC, MPJNM etc. and also executed building works for private sector. It has executed wide range of civil engineering projects like building construction work, water supply, pipeline, sewerage network, sewerage treatment plant, nalla tapping work, Re-use network, Over Head Tanks, GSR, Road work, Rejuvenation of Lake etc.

As an EPC contractor, the scope of its services includes detailed engineering of the project, procurement of construction materials, plant and machinery, construction and execution of the project and its operation and maintenance in accordance with the contractual provisions. After the Incorporation of the Company, the first order the Company has got from Indore Municipal Corporation, Water works and Drainage department for Repair of sewerage networking system of CENTRAL ZONE and make it function. The sub contact work from Pooja Reality Private limited for construction of tower at Village Talwadi, Chanda, Dist. Indore was assigned in favor of the Company. 

The business of the company is concentrated in the State of Madhya Pradesh and mainly in city of Indore, Chhattarpur, Sagar, Dindori, Jabalpur and Ujjain. The various clients of the Company are Indore Smart City Development Limited, Indore Municipal Corporation, Ujjain Smart City Limited, Ujjain Municipal Corporation and Madhya Pradesh Jal Nigam Maryadit.

Its order book in terms of value of contracts, including subcontracting assignments, was Rs. 1140.34 cr. as of January 31, 2024, Among the ten (10) projects it is currently executing five (5) projects aggregating to a total contract value of Rs. 1034.89 cr. relates to water supply system, One (1) project of Rejuvenation of Rudrasagar Lake and its surrounds of total value of Rs. 14.58 cr., One (1) project of Surface Parking, office Building of total value of Rs. 9.06 cr., One (1) project of Sewage Treatment plant of 25 MLD of total value of Rs. 22.70 cr., One (1) project of Real Estate Development of total value of Rs.  25.71 cr. and One (1) Project of Road development of Rs. 33.40 cr. Post execution of work till January 31, 2024, it is left with a pending order book of Rs. 904.98 cr. As of February 29, 2024, it had 164 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden IPO of 3999600 equity shares of Rs. 10 each at a fixed price of Rs. 111 per share to mobilize Rs. 44.40 cr. The issue opens for subscription on April 08, 2024, and will close on April 10, 2024. The minimum application to be made is for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 33.33% of the post-IPO paid-up capital of the company. The company is spending Rs. 0.76 cr. for this IPO process, and from the net proceeds, it will utilize Rs. 33.40 cr. for working capital, and Rs. 10.24 cr. for general corporate purposes. 

The issue is solely lead managed by Interactive Financial Services Ltd., and Bigshare Services Pvt. Ltd. is the registrar of the issue. Giriraj Stock Broking Pvt. Ltd. is the market maker for the company. 

The company has issued entire equity capital at par so far and has also issued bonus shares in the ratio of 3 for 5 in November 2023. The average cost of acquisition of equity shares by the promoters is Rs. 6.25, and Rs. 7.78 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 8.00 cr. will stand enhanced to Rs. 12.00 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 133.20 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 46.21 cr. / Rs. 0.47 cr. (FY21), Rs. 31.21 cr. / Rs. 0.15 cr. (FY22), and Rs. 39.15 cr. / Rs. 1.79 cr. (FY23). For 10M of FY24 ended on January 31, 2024, it earned a net profit of Rs. 7.84 cr. on a total income of Rs. 69.70 cr. 

For the last three fiscals, it has reported an average EPS of Rs. 1.28, and an average RONW of 13.50%. The issue is priced at a P/BV of 5.65 based on its NAV of Rs. 19.66 as of January 31, 2024, and at a P/BV of 2.22 based on its post-IPO NAV of Rs. 50.10 per share. The sudden boost in top and bottom lines in a pre-IPO year raise eyebrows. 

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 14.16. Thus the issue appears fully priced.

For the reported periods, the company has posted PAT margins of 1.01% (FY21), 0.49% (FY22), 4.59% (FY23), 11.26% (10M-FY24), and RoCE margins of 7.16%, 3.81%, 26.16%, 48.40% 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 Conart Engg., Brahmaputra Infra, MBL Infra and Tarmat Ltd. as their listed peers. They are trading at a P/E of 12.7, 18.0, NA, and 166.0 (as of April 05, 2024). However, they are not comparable on an apple-to-apple basis.

MERCHANT BANKER'S TRACK RECORD:
This is the 17th mandate from Interactive Financial in the last four fiscals, out of the last 10 listings, 2 opened at discount, 2 at par and the rest with premiums ranging from 1.46% to 20.74% on the day of listing. 

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