NACDAC Infra BSE SME IPO review (Apply)

•    The company specialized in comprehensive range of civil and structural services. 
•    After static performance for FY22 and FY23, it marked boosted performance from FY24 onwards.
•    The company has order book worth Rs. 88.33 cr. as of October 31, 2024.
•    Based on its FY25 annualized performance, the issue appears reasonably priced. 
•    Investors may park funds for long term.

ABOUT COMPANY:
Nacdac Infrastructure Ltd. (NIL) was originally incorporated as Uma Infratech Pvt. Ltd. in 2012, and changed its name to Nacdac Infra in 2022. It is primarily a core-construction company specializing in comprehensive range of civil and structural services. Its core offerings encompass the construction of multi-story buildings, electrical works (both Low-Tension & High-Tension), steel structure works, as well as bridges (including FOBs and ROBs) and all associated civil and structural works. 

With a strong focus on quality and efficiency, the company serves a diverse clientele spanning government agencies, and private corporations. It has successfully completed many projects in various departments of Government of India and Government of Uttarakhand. The company has an established track record of executing projects with more than a decade of experience in construction activities. Over the years, it has successfully completed 63 projects worth Rs. 96.75 cr. approximately. Its execution capabilities have grown significantly with time, both in terms of the size of projects and execution. 

The company has been ISO 9001:2015 accredited for its Quality Management System, ISO 14001:2015 for its Environmental Management System, ISO 45001:2018 for its Occupational Health and Safety Management System and are also registered as class A contractor with Uttarakhand Peyjal Sansadhan Vikas Evum Nirman Nigam, Uttarakhand. It is committed to providing customers with excellent work that satisfies project standards and specifications for materials, craftsmanship, scheduling, and public service, while remaining profitable and competitive. The company ensures continuous improvement through quality processes that are overseen by a competent management team. Before turning over a completed project, authorities from government agencies conduct inspections to identify faults or deviations from the methods or drawings used throughout the project's execution. 

It undertakes contracts independently or whenever required, through project-specific joint ventures with other infrastructure and construction entities when a project requires it to meet specific eligibility requirements in relation to such certain large projects, including requirements relating to particular types of experience. The company also undertakes sub-contracting projects from third-party major infrastructure and construction entities. As of November 30, 2024, it has order book worth Rs. 88.33 cr. As of October 31, 2024, it had 29 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden IPO of 2860000 equity shares of Rs. 10 each to mobilize Rs. 10.01 cr. (at the upper cap). The company has announced a price band of Rs. 33 - Rs. 35 per share. The issue opens for subscription on December 17, 2024, and will close on December 19, 2024. The minimum number of shares to be applied is for 4000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 27.17% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, the company will utilize Rs. 7.50 cr. for working capital, and the rest for general corporate purposes

The IPO is solely lead managed by GYR Capital Advisors Pvt. Ltd., and Maashitla Securities Pvt. Ltd., is the registrar to the issue. Giriraj Stock Broking Pvt. Ltd., is the Market Maker for the company. GYR Capital is also the syndicate member.

Having issued initial equity shares at par value, the company issued further equity shares in the price range of Rs. 12 - Rs. 250 per share in January 2021, and March 2024. It has also issued bonus shares in the ratio of 3 for 4 in March 2021, 13 for 1 in March 2022, and 0.30 for 1 in March 2024. The average cost of acquisition of shares by the promoters is Rs. 3.85, Rs. 5.20, and Rs. 8.61 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 7.67 cr. will stand enhanced to Rs. 10.53 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 36.84 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 10.32 cr. / Rs. 0.32 cr. (FY22), Rs. 11.74 cr. / Rs. 0.56 cr. (FY23), and Rs. 36.33 cr. / Rs. 3.17 cr. (FY24). For 7M of FY25 ended on October 31, 2024, it earned a net profit of Rs. 1.60 cr. on a total income of Rs. 13.76 cr. After static performance for FY22 and FY23, it posted boosted top and bottom lines for FY24. It has order book worth Rs. 88.33 cr. as of October 31, 2024, that indicates its future prospects.

For the last three fiscals, the company has reported an average EPS of Rs. 2.39 and an average RoNW of 17.50%. The issue is priced at a P/BV of 1.97 based on its NAV of Rs. 17.76 as of October 31, 2024, and at a P/BV of 1.56 based on its post-IPO NAV of Rs. 22.44 per share.

If we attribute FY25 annualized earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 13.41, and based on FY24 earnings, it stands at 11.63. The issue relatively appears reasonably priced.

For the reported periods, the company has posted PAT margins of 3.06% (FY22), 4.79% (FY23), 8.73% (FY24), 11.69% (7M-FY25), and RoCE margins of 8.82%, 15.74%, 25.88%, 12.18% for the referred periods respectively. 

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods. It will adopt a prudent dividend policy, based on its financial performance and future prospects. 

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown K2 Infra, Suraj Estate, SRM Contractors, as their listed peers. They are trading at a P/E of 22.7, 28.2, and 30.6 (as of December 13, 2024). However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKER'S TRACK RECORD:
This is the 34th mandate from GYR Capital in the last four fiscals, out of the last 10 listings all listed with premiums ranging from 16.38% to 305.44% on the date of listing.