Vishnu Prakash R Punglia IPO opens today: Should you subscribe to the issue?

The Rs 308.88-crore IPO of Vishnu Prakash R Punglia will open for subscription on Thursday as the company is looking to sell its shares in the range of Rs 94-99 apiece, with a lot size of 150 equity shares and in multiples thereafter. The issue can be subscribed till August 28. The issue is entirely a fresh offering of up to 3.12 crore equity shares.

Incorporated in 1986, Jodhpur-based Vishnu Prakash R Punglia is engaged in the business of designing and constructing infrastructure projects for the central and state governments, autonomous bodies, and private bodies across nine states and one union territory in India.

Net proceeds from the issue shall be utilized towards funding capital expenditure requirements for the purchase of equipment and machinery, funding the working capital requirements of the company and general corporate purposes. The company is giving a discount of Rs 9 per cent share to its eligible employees.

The company's principal business operations are broadly divided into four categories namely water supply projects, railway projects, road projects and irrigation network projects. It has been accredited with various registrations as a contractor with various departments and agencies.

A day before the issue, Vishnu Prakash R Punglia mobilised Rs 91.77 crore by allocating 92.7 lakh shares at Rs 99 apiece to 13 anchor investors on Wednesday, the company said. Quant Mutual Fund, Max Life Insurance, Kotak Mahindra Life Insurance, Societe Generale, Minerva Emerging Opportunities Fund, Copthall Mauritius Investment, and BNP Paribas Arbitrage participated in the anchor book.

The company had clocked a net profit of Rs 44.85 crore in the year ended on March 31, 2023, compared to a net profit of Rs 18.98 crore in the year ago period. Similarly, its revenue from operating improved to Rs 785.61 crore from Rs 485.73 crore during the period under review. As on July 15, 2023, it has an order book of Rs 3,799.53 crore.

The company has reserved 50 per cent of equity shares for qualified institutional bidders, while non-institutional investors will have 15 per cent of reservation for them. Remaining 35 per cent shares will go to the retail investors of the company.

Choice Capital Advisors and Pantomath Capital Advisors are the book running lead managers and Link Intime India has been appointed as the registrar to the issue. Shares of the company are proposed to be listed on both BSE and NSE tentatively on September 5, 2023.

Majority of the brokerage firms are positive on the issue and have suggested subscribing to it citing its robust order book, strong execution, healthy financial, growth prospects and attractive valuations for the investors. However, dependency on government projects, high working capital and increasing competition are the key challenges. Here is what a host of brokerage firms said for it:

Nirmal Bang Securities
Rating: Subscribe
Vishnu Prakash's niche focus on WSP (Water Supply Projects), low revenue base and demonstrated track record of high growth with margin expansion along with reasonable valuations makes the issue attractive compared to listed peers, said Nirmal Bang Securities.
"With strong industry tailwinds likely to persist in water related projects, railways and roads, we believe Vishnu Prakash is a decent proxy play on the infrastructure industry offering high growth with good profitability," it added with a recommendation to 'subscribe' to the IPO.

Reliance Securities
Rating: Subscribe
On FY23 financials, the IPO is valued at 10.2 times P/E, 9 times EV/EBITDA and 1.2 times EV/Sales. It has gradually increased their capabilities in terms of the size of projects executed. The infrastructure sector, which is a key driver for the Indian economy, is likely to provide several growth opportunities to the company, said Reliance Securities.

"Moreover, with the Union budget 2023-23, the company stands to benefit from various government initiatives in infrastructure, water waste management, road and highway Industry. In view of diversified business verticals, strong financials, multiple growth opportunities and a healthy order book, we recommend a 'subscribe' to the issue," it added.

Anand Rathi Shares & Stock Brokers
Rating: Subscribe
At the upper price band company is valuing at P/E of 13 times with a market cap of Rs 1,233.9 croe post issue of equity shares and return on net worth of 38.3 per cent. It has 51 on-going projects with total work awarded amounting to Rs 6,183 crore, of which Rs 2,384 crore worth of work has been executed, said Anand Rathi.

"Such healthy order book and industry tailwinds are expected to record strong profitability in coming years. On the valuation front, we believe that the company is fairly priced. Thus, we recommend an 'subscribe for long term' rating to the IPO," it added.

StoxBox
Rating: Subscribe
Vishnu Prakash has a track record of sustained revenue, EBITDA and PAT growth which grew at a CAGR of 55.1 per cent, 85.72 per cent and 118.23 per cent, respectively, during the FY21-23 period, respectively. On the upper price band, the issue is valued at a P/E of 9.5x based on FY2023 earnings which we feel is fairly valued, said StoxBox with a 'subscribe' rating for the issue.

Swastika Investmart

Rating: Subscribe
Vishnu Prakash is a well-known construction company that is primarily engaged in infrastructure projects for the central and state governments. The company is focused on water supply projects and is benefiting from various government initiatives. It has a
track record of successfully completing projects and has achieved notable growth through a robust order book, said Swastika.

"The company also has an in-house integrated model that helps it to successfully implement its projects. However, as it is in the construction industry, it faces stiff competition and high working capital requirements.  Despite these challenges, the IPO is coming at a fair valuation (P/E) of 9.5 times. Our overall outlook on the infrastructure sector is bullish," it added with a 'subscribe' tag.

Arihant Capital Markets
Rating: Subscribe
Vishnu Prakash R Punglia has a strong order book and execution within 24-30 months shows potential revenue visibility. The company is bidding on more projects with a conversion rate of 16-18 per cent. The majority of IPO funds will be utilized for working capital requirements of projects indicating strong execution of projects over the medium term, said Arihant Capital Markets.

The focus on EPC projects would reduce the debt burden and lead to cash flows. Most projects are from Rajasthan and change in the political environment won’t impact execution and business. At the upper band of INR 99, the issue is valued at an EV/EBITDA of 7 times based on FY23 EBITDA and PE of 10.1 times based on FY23 EPS of Rs 9.8, we suggest 'subscribe' to the issue," it added.

Sushil Finance
Rating: Subscribe
The company has a strong customer standing and track record of successfully completed projects. The order book entirely comprises projects awarded by governmental authorities. The company is planning to bid for higher value projects, however in order to do that the company will require a higher working capital, said Sushil Finance.

"The company is however highly concentrated in Rajasthan with revenue forming 66.86 per cent of total revenue for FY23. The company has Rs 84.47 crore as unsecured loans which are repayable on demand. Sudden recall may disrupt their operations. Keeping in mind all positive and negative factors investors can look for long term investment," it added.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Business Today)

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