Giriraj Civil NSE SME IPO review (May apply)

Giriraj Civil Developers Ltd. (GCDL) is a civil works contracting and engineering company. Its current concentration is on the Railway sector projects, where company undertakes a wide scope of work which includes construction of foot over bridges, platform extensions; sick line sheds, stabling lines etc. It has also venture into other infrastructural projects for government / semi-government bodies like MCGM and MRVC and for various private players. Most of GCDL’s projects undertaken are in the states of Maharashtra and Gujarat. Company has successfully completed several projects since inception in 2005 and currently has 21 ongoing projects.

To part finance its repayment of certain loans and working capital needs, GCDL is coming out with a maiden IPO of 900000 equity shares of Rs. 10 each at a fixed price of Rs. 100 per share to mobilize Rs. 9.00 crore. Issue opens for subscription on 19.03.18 and will close on 21.03.18. Issue comprises fresh issue of 300000 equity shares and an offer for sale of 600000 equity shares. Minimum application is to be made for 1200 shares and in multiples thereon, thereafter. Post allotment shares will be listed on NSE SME Emerge. Issue is solely lead managed by Aryaman Financial Services Ltd. and Cameo Corporate Services Ltd. is the registrar to the issue. Issue constitutes 27.74% of the post issue paid up capital of the company. Average cost of acquisition of the shares by the promoters is Rs. 3.29 and Rs. 3.89 per share. Having issued initial equity at par, it raised further equity in the price range of Rs. 25 to Rs. 85 and has also issued bonus shares in the ratio of 1 for 1 in November 2017. Post issue its current paid up equity capital of Rs. 2.94 crore will stand enhanced to Rs. 3.24 crore.


On performance front, GCDL has posted turnover/net profits of Rs.56.74 cr. / Rs. 1.97 cr. (FY14), Rs. 49.95 cr. / RS. 1.89 cr. (FY15), Rs. 48.21 cr. / Rs. 1.75 cr. (FY16) and Rs. 45.27 cr. / Rs. 1.79 cr. (FY17). For first nine months of the current fiscal, it has earned net profit of Rs. 1.35 cr. on a turnover of Rs. 33.99 crore. Thus its top and bottom line has shown declining trends. For last three fiscals it has posted an average EPS of Rs. 5.91 and an average RoNW of 9.26%. Issue is priced at a P/BV of1.56 on the basis of its NAV of Rs. 64.22 as on 31.12.17 and at a P/BV of 1.48 on the basis of its post issue NAV of Rs. 67.53. If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 18 against industry average of 35 and listed peers trading at CMM Infra (29), Dilip Buildcon (22), KNR Construction (17) (as on 15.03.18). Considering declining trends in performance, issue appears fully priced.

On merchant banker’s front, this is 29th mandate from its stable in the past three years (includes 1 main board IPO and the rest SME). Out of last 10 listings, 4 opened at discount, 1 at par, 4 with the premium ranging from 1% to 20%. The only main board listing (Apollo Micro) opened at a premium of around 73.8% on the day of listing.