BCPL Railway BSE SME IPO review (May apply)

•    BCPL is engaged in railway infrastructure development segment.
•    It suffered a severe setback for FY 16, but gradually recovered.
•    Its client list has many known public and private corporate.
•    Pricing of the issue appears reasonable.

ABOUT COMPANY:
BCPL Railway Infrastructure Ltd. (BCPL) is engaged in the field of Railway Infrastructure Development involving design, drawing, supply, Erection and commissioning of 25KV, 50Hz Single Phase Traction Overhead Equipment. The key clients of the company include various zones of the Indian Railways like Eastern Railway, South Eastern Railway, South East Central Railway, Northern Railway, East Coast Railway, North Frontier Railway, East Central Railway, Central Organisation For Railway Electrification (CORE) as well as large Public and Private Sector Undertakings like RITES Ltd., Durgapur Projects Ltd., Essel Mining Industries Ltd., Adhunik Group, Usha Martin Industries Ltd, Jindal Steel and Power Ltd., Rungta Mines, Haldia Energy Limited, Electrosteel and many more.

The company has kept its focus on the Electrification sector of the Railways keeping in view the vast scope of work in the existing and the untapped areas. As a result, Company has been able to build its resources capable of executing large, medium and small electrification projects in the most efficient and timely manner.

BCPL first made forays into a highly technical field, overhead electrification of the Indian Railways and through series of events over the successive years made rapid and spectacular progress in its chosen field of work and with dedication, team work, commitment, discipline and astute planning and strategy, scaled newer heights of progress and glory.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its working capital and general corpus fund needs, BCPL is coming out with a maiden IPO of 4860000 equity shares of Rs. 10 each at a fixed price of Rs. 35 per share to mobilize Rs. 17.01 cr. Issue opens for subscription on 05.10.18 and will close on 11.10.18. Minimum application is to be made for 4000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue constitutes 29.06% of the post issue paid up capital of the company. It comprises offer for sale of 660000 shares and fresh equity issue of 4200000 shares. Issue is solely lead managed by Gretex Corporate Services Pvt. Ltd. while Bigshare Services Pvt. Ltd. is the registrar to the issue.

Having issued initial equity at par, the company raised further equity in the price range of Rs. 50 to Rs. 100 per share between March 2003 and March 2009. It has also issued bonus shares in the ratio of 375 for 100 (July 2008) and 1 for 1 (February 2018). Average cost of acquisition of shares by the promoters is Rs. 1.55, Rs. 2.79, Rs. 3.39 and Rs. 44.53 per share. Post issue, BCPL’s current paid up equity capital of Rs. 12.52 cr. will stand enhanced to Rs. 16.72 cr.

FINANCIAL PERFORMANCE:
On financial performance front, for last four fiscals, BCPL has posted turnover/net profits of Rs. 55.53 cr. / Rs. 3.27 cr. (FY15), Rs. 25.74 cr. / Rs. 0.96 cr. (FY16), Rs. 34.99 cr. / Rs. 1.27 cr. (FY17) and Rs. 50.64 cr. / Rs. 4.05 cr. (FY18). For first five months ended on 31.08.18 of FY19 it has posted net profit of Rs. 2.39 cr. on a turnover of Rs. 28.87 cr. The company suffered severe setback in FY16 raising concern, however it has gradually staged progress thereafter. For last three fiscals,

it has posted an average EPS of Rs. 3.45 and an average RoNW of 7.20%. Issue is priced at a P/BV of 1.10 based on its NAV of Rs. 31.66 as on 31.08.18 and at a P/BV of 1.08 based on post issue NAV of Rs. 32.50. If we annualize FY19 earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 10 making it a reasonably priced issue.

COMPARISION WITH LISTED PEERS:
As per offer documents, it has no listed peers to compare with.

MERCHANT BANKER’S TRACK RECORD:
On merchant banker’s front, this is 17th mandate from its stable in last three years. Out of last 10 listings, 1 opened at discount, 3 at par and the rest with a premium ranging from 1.32% to 8% on the day of listing.