Vishnusurya Proj NSE SME IPO review (Apply)

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Review By Dilip Davda on September 27, 2023

•    VPIL is the infrastructure-related construction and service provider.
•    It has posed growth in its top lines for the reported periods.
•    Based on FY23 earnings, the issue appears reasonably priced. 
•    It has orders on hand worth Rs. 161+ cr. as of August 31, 2023.
•    Investors may park funds for medium to long-term rewards. 

ABOUT COMPANY:
Vishnusurya Projects and Infra Ltd. (VPIL) was incorporated in the year 1996 with a small and dedicated team of construction experts, service providers, contractors, suppliers, and consultants to accomplish one shared goal, building a responsible future. The Promoter and Promoter Group have an interest in a diverse set of businesses spread across the Engineering Procurement and Construction ("EPC"), mining, education, technology, risk mitigation, media, consultancy, drones, etc.

VPIL is engaged in the mining of rough stones and manufacturing of aggregates and Manufacture-sand by using Crushing Plants and Sand washing plants. In addition to mining activities, it is engaged in EPC Projects (construction and infrastructure) delivered across all key sectors such as water, transportation, rail, resource, and institutional development. The Company executed and delivered multiple real estate projects in the past such as the construction of villas, multi-storied apartments, specific contracts like compound walls, renovation works, site formation, etc., and design and construction of various infrastructure projects for the government, autonomous and private bodies in state of Tamil Nadu. The Company is also engaged in buying, selling, and providing integrated solutions for Drones as a Service for surveillance, mapping, and surveying purposes.

It has executed a diverse range of construction and infrastructure projects in sectors such as roads and highway construction, railways, waterways, sewerage operation, building construction, etc., and successfully completed key projects across diverse market segments and has diversified exposures across property, civil, infrastructure, mining, and aggregates sectors. VPIL has executed 17 projects in recent years, out of which 10 are civil construction projects, 1 is road construction and 6 are infrastructure-related projects with an aggregate value of Rs. 136.19 cr. 

As of August 31, 2023, VPIL along with its JV's have been awarded a total of 5 projects aggregating to Rs. 235.50 cr. of which Rs. 73.97 cr. worth works have been executed and the remaining Rs. 161.53 cr. are part of its order book. As of August 31, 2023, it had 285 employees on its payroll and also employed contract laborers as and when needed. As of the said date, it had 54 contract laborers working with various departments.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden IPO of 7350000 equity shares of Rs. 10 each at a fixed price of Rs. 68 per share to mobilize Rs. 49.98 cr. The issue opens for subscription on September 29, 2023, and will close on October 05, 2023. 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 29.87% of the post-IPO paid-up capital of the company. The company is spending Rs. 6.99 cr. for this IPO process and from the net proceeds, it will utilize Rs. 30.00 cr. for working capital, Rs. 9.15 (13.99%) cr. for repayment/prepayment of certain borrowings, and Rs. 3.84 cr. for general corporate purposes. 

Khandwala Securities Ltd. is the sole lead manager and Cameo Corporate Services Ltd. is the registrar of the issue. Nikunj Stock Brokers Ltd. is the market maker for the company. Saffron Capital Advisors Pvt. Ltd. and Neomile Corporate Advisory Ltd. are the advisors on the issue. 

Having issued initial equity shares at par, the company issued/converted further equity shares in the price range of Rs. 15 - Rs. 80 per share between August 2011 and October 2022. It has also issued bonus shares in the ratio of 9 for 10 in July 2023. The average cost of acquisition of shares by the promoters is Rs. 3.04 per share. 

Post-IPO, VPIL's current paid-up equity capital of Rs. 17.26 cr. will stand enhanced to Rs. 24.61 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 167.35 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the past three fiscals, the company has (on a consolidated basis) posted a total revenue/net profit of Rs. 63.39 cr. / Rs. 2.29 cr. (FY21), Rs. 96.04 cr. / Rs. 21.59 cr. (FY22), and Rs. 133.26 cr. / Rs. 17.37 cr. (FY23). The company reported other operating revenues of Rs. 14.87 cr. for FY22 and Rs. 21.53 cr. for FY23. According to the management, this is attributed to the sale of land, other movable assets, and unusable inventory disposal. 

For the last three fiscals, VPIL has reported an average EPS of Rs. 23.07 and an average RoNW of 22.12%. The issue is priced at a P/BV of 1.04 based on its NAV of Rs. 65.53 as of March 31, 2023, and at a P/BV of 1.53 based on its post-IPO NAV of Rs. 44.50 per share. 

If we attribute FY23 earnings to the post-IPO fully diluted paid-up equity capital of the company, then the asking price is at a P/E of 9.63. Thus the issue appears reasonably priced. 

For the last three fiscals, the company has posted PAT margins of 6.36% (FY21), 8.18% (FY22), and 12.44% (FY23), while RoCE margins at 11.20%, 18.98%, and 31.22% for corresponding periods respectively.

DIVIDEND POLICY:
The company has not declared any dividends for the last five fiscals. The company adopted a prudent dividend policy in July 2023, based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Rachana Infra, Sonu Infratech, and AB Infra as their listed peers. They are trading at a P/E of 85.08, 19.49, and 21.32 (as of September 27, 2023). However, they are not comparable on an apple-to-apple basis. 

MERCHANT BANKER'S TRACK RECORD:
This is the first mandate from Khandwala Securities in the last three fiscals. Thus it has no track records for the reported periods. 

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