Capacit’e Infra IPO review (Apply)

Capacit’e Infraprojects Ltd. (CIL) is a fast growing construction company focused on Residential, Commercial and Institutional buildings. CIL has an an Order Book of Rs. 4602.48 crore as at 31st May 2017 comprising of 56 ongoing projects. The company provides end-to-end construction services for residential buildings (“Residential”), multi level car parks, corporate office buildings and buildings for commercial purposes (collectively, “Commercial”) and buildings for educational, hospitality and healthcare purposes (“Institutional”). Its capabilities include constructing concrete building structures as well as composite steel structures. CIL also provides mechanical, electrical and plumbing (“MEP”) and finishing works.

Company predominantly operates in the Mumbai metropolitan region (“MMR”), the National Capital Region (“NCR”) and Bengaluru. Its operations are geographically divided into MMR and Pune (“West Zone”), NCR and Patna (“North Zone”) and Bengaluru, Chennai, Hyderabad, Kochi and Vijaywada (“South Zone”). As on May 31, 2017, projects in the West Zone, North Zone and South Zone constituted, approximately 58.93%, 14.29% and 26.79% of its total projects, respectively. CIL works for a number of reputed clients and are associated with some marquee construction projects in India. Some of its clients include Kalpataru, Oberoi Constructions Limited, The Wadhwa Group, Saifee Burhani Upliftment Trust, Lodha Group, Rustomjee, Godrej Properties Limited, Brigade Enterprises Limited and Prestige Estates Projects Limited.

To part finance its working capital requirements, purchase of capital assets and general corpus fund needs, CIL is coming out with a maiden IPO of 16000000 equity shares of Rs. 10 each with a price band of Rs. 245-250 to mobilize Rs. 400 crore. Issue opens for subscription on 13.09.17 and will close on 15.09.17. Minimum application is to be made for 60 shares and in multiples thereon, thereafter. BRLMs to this issue are Axis Capital Ltd., IIFL Holdings Ltd. and Vivro Financial Services Pvt.Ltd. Karvy Computershare Pvt. Ltd. is the registrar to the issue. Post allotment, shares will be listed on BSE and NSE. Having issued initial equity at par, it raised further equity in a price range of Rs. 46.66 to Rs. 625.39 per share between November 2012 and August 2015. It has also issued bonus shares in the ratio of 6 shares for every 1 share held in December 2016 and has also effected conversion of CCPS in June 2017. Post issue its current paid up equity capital of Rs.51.89 crore will stand enhanced to Rs. 67.89 crore. Issue consists of 23.56% of fully diluted post issue paid up capital of the company.

On performance front, CIL has posted (on a consolidated basis) turnover/net profits of Rs.216.58 cr. / Rs. 4.11 cr. (FY14), Rs. 562.58 cr. / Rs. 32.05 cr. (FY15), Rs. 860.25 cr. / Rs. 48.84 cr. (FY16) and Rs. 1165.97 cr. / Rs. 69.66 cr. (FY17). For last three fiscals it has posted an average EPS of Rs. 12.32, average RoNW of 30.41%. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of around 24 against industry composite of 20.16. Thus issue appears fully priced. However, it has been outperforming on numbers for past five fiscals (with CAGR of 75% in revenues and 154% in net profits) and considering its order book the company is poised to ripe benefits from Housing for All by 2022, affordable housing and smart city plans.

On BRLM’s front, three merchant bankers associated with this offer have handled 28 public offers in the past three years, out of which 9 issues closed below the offer price on listing date.

Conclusion: Investment in this outperforming company’s offer may be considered for short to long term.