Ganesh Infra NSE SME IPO review (Apply)

•    The company is an EPC contractor undertaking civil. Residential/commercial buildings, road construction, railway infra, power projects, water distribution etc.
•    As of August 31, 2024, it had an order book worth Rs. 574+ cr.
•    It posted growth in its top and bottom lines for the reported periods. 
•    Based on its latest financial performances, the issue appears fully priced. 
•    Investors may park funds for medium to long term. 

ABOUT COMPANY:
Ganesh Infraworld Ltd. (GIL) is a construction company offering a range of construction and allied services across industrial civil projects, residential & commercial buildings, road construction, railway infrastructure projects, power projects and water distribution projects in India. It specializes in integrated engineering, procurement, and construction ("EPC") services and provides services across the construction value chain, ranging from planning, design, construction including mechanical, electrical, civil and industrial and allied services and supply of materials for the execution of services. 

It conducts business operations primarily through three verticals, namely, (i) civil and electrical infrastructure projects; (ii) road and rail infrastructure development projects; and (iii) water infrastructure development projects, as a single operating segment of engineering and construction. Over the years, it has successfully executed several engineering projects as sub-contractor to some of the established and large engineering and construction companies in India. GIL's execution capabilities and timely execution of projects have helped to procure repeat orders.

Further, the Company has also acted as a contractor for several small and mid-sized clients for various engineering and civil construction projects viz., Magnum Ventures Limited, Raikela Iron Ore Mines, JD cables Private Limited, Celica MotoCorp Private Limited, Jain International Power Limited and Nirmala Developers, amongst others.

It started business operations in the state of West Bengal in the year 2017 and expanded its operations in the state of Rajasthan, Uttar Pradesh, Maharashtra, Odisha, Haryana, Jharkhand, Bihar, Jammu & Kashmir, Andhra Pradesh and Chhattisgarh since then. Over a period of last three financial years, it has executed various projects which includes water distribution, electrical infrastructure, road infrastructure, and civil construction, in the state of West Bengal, Rajasthan, Uttar Pradesh and Maharashtra.

In the last three fiscals, while it has completed projects worth Rs. 504+ cr., as of August 31, 2024, it had an order book worth Rs. 574+ cr. As of the said date, it had 42 employees on its payroll, and more than 250 contract workers at various construction sites.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 11876800 equity shares of Rs. 5 each to mobilize Rs. 98.58 cr. (at the upper cap). The company has announced a price band of Rs. 78 - Rs. 83 per share. The issue opens for subscription on November 29, 2024, and will close on December 03, 2024. The minimum number of shares to be applied is for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 27.80% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, the company will utilize Rs. 70.00 cr. for working capital, and the rest for general corporate purposes.  

The IPO is solely lead managed by Vivro Financial Services Pvt. Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue. Rikhav Securities Ltd. is the Market Maker for the company. 

Having issued initial equity shares at par value, the company issued further equity shares at a fixed price of Rs. 50.00 per share (on the basis of Rs. 5 FV), in April 2024. The company issued bonus shares in the ratio of 1 for 4 in July 2024. The average cost of acquisition of shares by the promoters is Rs. 1.99, and Rs. 4.00 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 15.42 cr. will stand enhanced to Rs. 21.36 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 354.59 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 81.15 cr. / Rs. 1.89 cr. (FY22), Rs. 135.05 cr. / Rs. 5.21 cr. (FY23), and Rs. 291.81 cr. / Rs. 15.55 cr. (FY24 - two split periods). For 5M of FY25 ended on August 31, 2024, it earned a net profit of Rs. 15.37 cr. on a total income of Rs. 212.33 cr. It posted quantum jump in its top and bottom lines from FY24 onwards. 

For the last three fiscals, the company has reported an average EPS of Rs. 3.44 and an average RoNW of 49.01%. The issue is priced at a P/BV of 3.87 based on its NAV of Rs. 21.45 as of August 31, 2024, and at a P/BV of 2.15 based on its post-IPO NAV Rs. 38.56 per share (at the upper cap). 

If we attribute FY25 annualized super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 9.61, and based on FY24 earnings, the P/E stands at 22.80. The issue appears fully priced. 

For the reported periods, the company has posted PAT margins of 2.33 % (FY22), 3.86 % (FY23), 5.33% (FY24), 7.24% (5M-FY25), and RoCE margins of 40.54 %, 56.77%, 61.58%, 35.17% respectively for the referred periods.

DIVIDEND POLICY:
The company has not paid any dividends for the reported periods of the offer document. It has adopted a dividend policy in June 2024, based on its financial performance and future prospects. 

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown Capacit'e Infra, Chavda Infra, AVP Infra, and PSP Projects, as their listed peers. They are trading at a P/E of 17.0, 16.2, 18.4, and 26.1 (as of November 22, 2024). However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKER'S TRACK RECORD:
This is the 3rd mandate from Vivro Financial in the last three fiscals. Out of last 2 listings, all listed with premiums ranging from 43.98% to 90% on the listing date.