Vishnu Prakash R Punglia IPO review (May apply)

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Review By Dilip Davda on August 21, 2023

•    VPRPL is an integrated EPC company having contracts in 9 states and 1 union territory.
•    The company has posted growth in its top and bottom lines for the reported periods. 
•    It has orders on hand worth Rs. 3800 cr. approx. as of July 15, 2023.
•    Based on FY23 earnings, the issue appears fully priced. 
•    Well-informed investors may park funds for medium to long-term rewards. 

ABOUT COMPANY:
Vishnu Prakash R Punglia Ltd. (VPRPL) is an ISO 9001:2015 certified integrated engineering, procurement and construction ("EPC") company with experience in design and construction of various infrastructure projects for the Central and State Governments, autonomous bodies, and private bodies across the 9 States and 1 Union territory in India. Its principal business operations are broadly divided into four categories: (i) Water Supply Projects ("WSP"); (ii) Railway Projects; (iii) Road Projects and (iv) Irrigation Network Projects.

VPRPL has been accredited with various registrations as a contractor with various departments and agencies viz. Jodhpur Development Authority, Jodhpur (Class AA), Rajasthan, Public Health Engineering Department, Rajasthan, (Class AA), Water Resources Department, Rajasthan (Class AA), Roads and Building Department, Gujarat (Class AA), South Western Command, Military Engineering Services (MES), Jaipur (Class 'S'), Rajasthan, Public Works Department, Chhattisgarh (Class A), Public Works Department, Rajasthan (Class AA), Public Works Department, Madhya Pradesh, Bhopal (Civil works), pursuant to which it is also eligible to participate and undertake projects awarded by various other departments and agencies.

The company has design and engineering, procurement, project management and quality management teams along with a fleet of 499 construction equipment and vehicles. Its in-house teams deliver projects from design to completion. This reduces dependency on third parties for key materials such as ready-mix concrete, stone aggregates, bitumen and services such as design and engineering, transportation and logistics required in the development and construction of projects.

The company has not undertaken any sub-contracting assignments to date. It undertakes assignments independently or whenever required, through its joint ventures. While the company executes the majority of the projects itself, it also forms project-specific joint ventures and consortiums with other infrastructure and construction entities. As of July 15, 2023, the company had an Order Book of Rs.  3799.53 cr. As of March 31, 2023, it had 929 employees on its payroll and it also hires contract labourers as and when needed. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden primary IPO of 31200000 equity shares of Rs. 10 each via the book-building route. It has announced a price band of Rs. 94 - Rs. 99 per share and mulls mobilizing Rs. 308.88 cr. at the upper cap. The issue opens for subscription on August 24, 2023, and will close on August 28, 2023. The minimum application to be made is for 150 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 25.03% of the post-IPO paid-up equity capital of the company. It has reserved 300000 equity shares for its eligible employees and offering them a discount of Rs. 9 per share, and the balance is allocated as not more than 50% for QIBs, not less than 15% for HNIs, and not less than 35% for Retail investors. 

From the net proceeds of the IPO funds, the company will utilize Rs. 62.18 cr. for the purchase of machinery/equipment, Rs. 150.00 cr. for working capital and the balance for general corporate purposes. 

Choice Capital Advisors Pvt. Ltd. and Pantomath Capital Advisors Pvt. Ltd. are the two joint Book Running Lead Managers (BRLMs) and Link Intime India Pvt. Ltd. is the registrar of the issue. 

Having issued/converted initial equity shares at par, the company issued further equity shares at a price of Rs. 215 per share in December 2022 and has also issued bonus shares in the ratio of 2 for 1 in February 2023. The average cost of acquisition of shares by the promoters is Rs. 2.17 and Rs. 3.33 per share. 

Post-IPO, VPRPL's current paid-up equity capital of Rs. 93.44 cr. will stand enhanced to Rs. 124.64 cr. Based on the upper band of IPO pricing, the company is looking for a market cap of Rs. 1233.98 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, VPRPL has posted a turnover/net profit of Rs. 487.67 cr. / Rs. 18.98 cr. (FY21), Rs. 787.39 cr. / Rs. 44.85 cr. (FY22), and Rs. 1171.46 cr. / Rs. 90.64 cr. (FY23). The company has posted growth in its top and bottom lines at a CAGR of 55.10% and 118.52% respectively in the last three fiscals. 

For the last three fiscals, VPRPL has reported an average EPS of Rs. 7.35 and an average RoNW of 33.18%. The issue is priced at a P/BV of 2.74 based on its NAV of Rs. 36.11 as of March 31, 2023, and at a P/BV of 1.98 based on its post-IPO NAV of Rs. 50.01 per share (at the upper cap). 

If we attribute FY23 earnings to post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 13.62. 

DIVIDEND POLICY:
The company has not paid any dividends since incorporation. It adopted a prudent dividend policy in January 2023, based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown PNC Infra, H G Infra, NCC Ltd., Rail Vikas Nigam, and ITD Cementation as their listed peers. They are currently trading at a P/E of 13.94, 13.71, 15.38, 19.69, and 24.26 (as of August 21, 2023). However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKER'S TRACK RECORD:
On the merchant banker's front, this is the 1st mandate from Choice Capital in the last three fiscals (including the ongoing one) and has no track records for the said periods. 

This is the 7th mandate from Pantomath Capital in the last three fiscals (including the ongoing one). Out of the last 5 listings, all opened at premiums ranging from 5% to 41% on the date of listing.

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