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Review By Dilip Davda on July 17, 2024

•    The company that has prime focus on water supply related works, is adding irrigation, building constructions and road constructions activities to stream line its income.
•    The company posted bumper top and bottom lines with rising infra activities in the related segments.
•    It had pending orders worth Rs. 160 cr. as of March 31, 2024.
•    Based on FY24 earnings, the issue appears lucratively priced.
•    Investors may park funds for the medium to long term rewards.

ABOUT COMPANY:
VL Infraprojects Ltd. (VLIL) is a Government Approved Contractor in "AA" Class with the Government of Gujarat, Civil/Electrical Contractor License from Karnataka State Public Works department, Special class registration in Government of Telangana and contractor registration in Government of Madhya Pradesh. 

The company provides designing, construction, and commissioning of various types of government projects especially in water infrastructure and irrigation segment. The Company is engaged in executing water supply and sewerage infrastructure projects mainly involving the procurement of pipes and their laying, joining, and commissioning with backward integration including all allied civil engineering works like construction of civil work, pumping stations and installation of electro-mechanical equipment's (pumping machinery) for distribution of water supply from the river to household. 

It also provides operations & maintenance services for water distribution pipelines. The company began its operations focusing on water pipeline projects in Gujarat. It has since expanded services to encompass all aspects of road construction, irrigation, water infrastructure, and environmental projects. It has locational presence in the state of Madhya Pradesh, Telangana, Maharashtra, and Gujarat. The company is committed to maintaining the highest standards, the same is evident by the ISO 9001:2015 certification for quality management, ISO 14001:2015 certification for environmental management, and ISO 45001:2018 certification for occupational health and safety management systems.

Over the years, on material basis, it has successfully executed around 30 projects worth Rs. 104.86 cr. Over time, its execution capabilities have grown significantly both in terms of the size of projects that it bids for and executes, and the number of projects that it executes simultaneously. As of July 13, 2024, it has 15 on-going projects worth approximately Rs. 160 cr. 

The Vision of the Company is to stride towards becoming a prominent player in Engineering and Construction Industry. It has focused on its vision and is working with a strategy to tap the huge growth potential in the Infrastructure Sector, in India both independently and through collaborations. To achieve this, the company is committed to complete customer satisfaction by creating a value-driven ethical & professional working environment with well-defined objectives. These goals would be embracing the principles of engineering excellence, fostering innovation, leadership development, employee engagement and encouraging collaborations at all levels.

The company has achieved a great reputation in this field within a short span of time with its strong & effective management and in time project execution. Company has successfully handled and executed various water infrastructure projects of Gujarat Water Supply and Sewerage Board, Gujarat Water Infrastructure Limited, Nagarpalikas, Public Works Department (PWD) also with Joint Venture with Spun pipe Construction co (Baroda Private Limited), HM Electro Mech Limited, Krishna Construction Co., Partnership Firm.

Out of our total revenue from operations more than 50% of revenue originates from Top 10 Customers consisting of Gujarat Water Supply and Sewerage Board, GKC Projects Limited, Naandi Infratech Private Limited, Nagarapalika Parishad, Kurwai, Nagarapalika Parishad, Sirmour, Nagarapalika Parishad, Pali and Nagarapalika Parishad, Dhanpuri. Further, out of its total purchases more than 50% of purchases originates from Top 10 suppliers consisting of The Spunpipe and Construction Company (Baroda) Private Limited, H.M. Electro Mech Limited, Umiya Steel Corporation, Bajrang Industries, AL Muneer MM Traders, Sri Rama Traders, AL Adil Traders, Saurashtra Cement Limited, Kamala Paints and Hardware and Jindal Saw Limited. As of March 31, 2024, it had 30 employees on its payroll. 

According to the management, it has shifted its focus from small dia pipelines to big dia pipelines projects that gives better margins and going forward, it is adding other activities like constructions of Roads, Irrigation related services and real estate constructions.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 4410000 equity shares of Rs. 10 each to mobilize Rs. 18.52 cr. at the upper cap. It has announced a price band of Rs. 39 - Rs. 42 per share. The issue opens for subscription on July 23, 2024, and will close on July 25, 2024. The minimum application to be made is for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSESME Emerge. The issue constitutes 28.07% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 14.80 cr. for working capital, and the rest for general corporate purposes. 

The issue is solely lead managed by Beeline Capital Advisors Pvt. Ltd., and Skyline Financial Services Pvt. Ltd. is the registrar to the issue. Beeline group's Spread X Securities Pvt. Ltd. is the market maker for the company. 

The company has issued/converted entire equity shares at par value so far, and has also issued bonus shares in the ratio of 19 for 1 in December 2015, 1740 for 1000 in January 2020, 3 for 2 in March 2023, and 2 for 1 in October 2023. The average cost of acquisition of shares by the promoters is Rs. 0.72, Rs. 1.49, and Rs. 2.10 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 11.30 cr. will stand enhanced to Rs. 15.71 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 65.99 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 30.78 cr. / Rs. 0.83 cr. (FY21), Rs. 35.61 cr. / Rs. 1.11 cr. (FY22), Rs. 45.65 cr. / Rs. 2.23 cr. (FY23), and Rs.  114.00 cr. / Rs. 6.14 cr. (FY24). Due to higher spending on infra by state governments its FY24 performance marked sharp improvements. Trends are likely to continue in the near term, opines management. 

For the last three fiscals, it has reported an average EPS of Rs. 2.86, and an average RoNW of 28.55%. The issue is priced at a P/BV of 2.90 based on its NAV of Rs. 14.47 as of March 31, 2024, and at a P/BV of 1.89 based on its post-IPO NAV of Rs. 22.20 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 10.74. 

For the reported periods, the company has posted PAT margins of 2.71% (FY21), 3.11% (FY22), 4.89% (FY23), 5.39% (FY24), and RoCE margins of 20.24%, 18.41%, 22.97%, 39.09% 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 EMS Ltd. as their listed peer. It is trading at a P/E of 24.6 (as of July 16, 2024). However, they are not comparable on an apple-to-apple basis.

MERCHANT BANKER'S TRACK RECORD:
This is the 44th mandate from Beeline Capital in the last three fiscals (including the ongoing one), out of the last 10 listings, all listed with premiums ranging from 7.14% to 386.67% on the date of listing. 

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