Active Infra NSE SME IPO review (May apply)

•    The company is engaged in infrastructure and commercial projects related construction activities and services.
•    After gaining grounds for FY23, it posted almost static top and bottom lines for the last two fiscals with inflated profits to pave the way for fancy valuations.
•    The first half financial performance indicates degrowth in its top line.
•    Based on its recent super earnings, the issue appears aggressively priced. 
•    It has on hand orders worth Rs. 345+ cr. currently.
•    Well-informed investors may park moderate funds for long term in this dividend paying company.

ABOUT COMPANY:
Active Infrastructures Ltd. (AIL) operates primarily in two key segments: Infrastructure and Construction of Commercial Projects. Within the Infrastructure segment, its focus encompasses the construction of roads (including bridges), flyovers, water supply systems, irrigation projects, and other related infrastructure activities and in its Construction of commercial projects segment, the company builds various spaces such as, office complexes, retail centers, exhibition halls, retail outlets, private educational institutions, and other facilities.

AIL operates on a pan-India scale, with completed, ongoing and upcoming projects being in the state of Maharashtra, Madhya Pradesh, Uttar Pradesh and Tripura. It strives for achieving customer satisfaction in all projects, without compromising on quality and safety. Its manpower, resources, machinery and equipment, together with engineering capabilities, strategically positions AIL to meet the market demands. It is committed to achieving industry standards in quality, environmental sustainability, and occupational health & safety requirements across all projects. This helps in ensuring that the Company upholds innovation, quality, and client-centred values.

As of the date of filing this offer document, it had 53 employees on its payroll, and additional 150-160 contractual employees on various sites.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 4300200 equity shares of Rs. 5 each to mobilize Rs. 77.83 cr. at the upper cap. It has announced a price band of Rs. 178 – Rs. 181 per share. The issue opens for subscription on March 21, 2025, and will close on March 25, 2025. The minimum number of shares to be applied is for 600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 28.64% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, the company will utilize Rs. 38.98 cr. for working capital, Rs. 16.72 cr. for repayment/prepayment of certain borrowings, Rs. 7.05 cr. for capex towards purchase of construction equipments, and the rest for general corporate purposes. 

The IPO is solely lead managed by Kreo Capital Pvt. Ltd., and Bigshare Services Pvt. Ltd., is the registrar to the issue. Badjate Stock and Shares Pvt. Ltd., is the Market Maker for the company. 

After issuing entire initial equity shares at par value, the company issued bonus shares in the ratio of 7 for 1 in November 2023. The average cost of acquisition of shares by the promoters is Rs. 4.70 per share.

 Post-IPO, company’s current paid-up equity capital of Rs. 5.36 cr. will stand enhanced to Rs. 7.51 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 271.77 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total income/net profit of Rs. 1.11 cr. / Rs. 0.09 cr. (FY22), Rs. 89.59 cr. / Rs. 9.87 cr. (FY23), and Rs. 97.43 cr. / Rs. 10.45 cr. (FY24). For H1 of FY25 ended on September 30, 2024, it earned a net profit of Rs. 5.55 cr. on a total income of Rs. 33.90 cr. 

For the last three fiscals, the company has reported an average EPS of Rs. 5.89 (simple average) and an average RoNW of 36.07 %. The issue is priced at a P/BV of 5.96 based on its NAV of Rs. 30.35 as of September 30, 2024, and at a P/BV of 2.46 based on its post-IPO NAV of Rs. 73.49 per share (at the upper cap).

According to the management, it has a strong order book worth Rs. 345+ cr. on hand currently (refer page 131-132 of the offer document), and has submitted tenders worth Rs. 700 – Rs. 800 cr. and is confident of getting the same awarded to it due to low bidding. Most of these projects has high margin contracts that will boost top and bottom lines for the company in coming years. 

If we attribute FY25 annualized earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 24.46. Based on FY24 earnings, the P/E stands at 26.01. The issue relatively appears aggressively priced.

For the reported periods, the company has posted PAT margins of 7.95 % (FY22), 11.04% (FY23), 10.75%, (FY24), 16.49% (H1-FY25), and RoCE margins of 0.09%, 14.84%, 14.90%, 7.10% for referred periods, respectively.

DIVIDEND POLICY:
The company has paid per share a dividend of Rs. 3 (28.12.22), Rs. 0.75 (27.03.23), and Rs. 1.75 (25.07.24). It has adopted a dividend policy in September 2024, based on its financial performance and future prospects. 

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown AVP Infra, VL Infraprojects, as their listed peers. They are trading at a P/E of 16.2, and 10.8 (as of March 18, 2025). However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKER’S TRACK RECORD:
This is the 2nd mandate from Kreo Capital in the ongoing fiscal.  From the only listing that took place so far, it marked a discount opening on the listing date.