Oval Projects BSE SME IPO review

•    The company is engaged in providing infrastructure services for EPC, O&M projects on PAN India basis.
•    The company marked growth in its top and bottom lines for the reported periods.
•    Boosted bottom line for FY25 raise eyebrows and concern over its sustainability going forward.
•    Its order book stood at Rs. 453 cr. as of April 09, 2025.
•    Based on its recent financial data, the issue appears aggressively priced.
•    Well-informed/cash surplus investors may park moderate funds for long term.

ABOUT COMPANY:
Oval Projects Engineering Ltd. (OPEL) is primarily an infrastructure services company engaged in the business of providing engineering, procurement and construction (“EPC”) industrial infrastructure services and operations and maintenance (“O&M”) services to PAN India customers especially in the Oil & Gas sector. Headquartered at Agartala-Tripura, the company commenced business operations as a project management consultancy company. Over the last decade, it has expanded and diversified business services to EPC, O&M and other infrastructure services and constantly improved business processes.

The Company focuses on upstream, midstream and downstream facility development activities in Oil and Gas sector, such as processing plant, pipeline laying, horizontal directional drilling, terminal station, City Gas Distribution (CGD) work, O&M of PNG/PNG services and in other related EPC projects. It also provides O&M services for captive power plants. Beyond Oil & Gas, OPEL actively undertake civil projects catering to the urban development, including smart cities. 

It has been awarded a few projects in urban infrastructure which are funded by international financing organizations. The company has a proven track record of delivering complex infrastructure projects. Its client base comprises of established public sector players in the Oil and Gas Industry and central & state Government establishments including the ones funded by international financing organizations in the infrastructure sector.

Over the years, it has successfully executed more than 30 projects in oil & gas vertical and special projects vertical with quantifying to approximately Rs. 203.63 cr.  Its execution capabilities have grown significantly with time, both in terms of the size of projects that it bids for and executes, and the number of projects that it executes simultaneously.

As of April 09, 2025, it had more than 30 on-going projects in oil & gas and special infrastructure projects vertical which is worth approximately Rs. 453 cr., suggesting strong Order Book. As of March 31, 2025, it had 123 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book-building route IPO of 5499200 equity shares to mobilize Rs. 46.74 cr. at the upper cap. The company has announced the price band of Rs. 80 – Rs. 85 per share of Rs. 10 each. The IPO opens for subscription on August 28, 2025, and will close on September 01, 2025. The minimum application to be made is for 3200 shares and in multiple of 1600 shares thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.48% of post-IPO paid-up equity capital of the company. From the net proceeds of the issue, the company will utilize Rs. 37.03 cr. for working capital, and the rest for general corporate purposes.

The IPO is solely lead managed by SMC Capitals Ltd., while MAS Services Ltd. is the registrar to the issue. SMC Group’s SMC Global Securities Ltd. is the market maker, as well as a syndicate member. 

The company has issued initial equity shares at par, and issued further equity shares in the price range of Rs. 57.50 – Rs. 10570.82 per share between March 2016, and December 2024. It has also issued bonus shares in the ratio of 170 for 1 in September 2023. The average cost of acquisition of shares by the promoters is Rs. 3.39 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 15.27 cr. will stand enhanced to Rs. 20.77 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 176.54 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted total Revenue/Net Profit of Rs. 64.09 cr. / Rs. 3.19 cr. (FY23), Rs. 78.99 cr. / Rs. 4.40 cr. (FY24), and Rs. 103.44 cr. / Rs. 9.33 cr. (FY25). Quantum jump in top and bottom lines for FY25 raise eyebrows and concern over its sustainability.

For the last three fiscals, the company has reported an average EPS of Rs. 5.92, and an average RoNW of 19.41%. The issue is priced at a P/BV of 2.67 based on its NAV of Rs. 31.89 as of March 31, 2025, and at a P/BV of 1.82 based on its post-IPO NAV of Rs. 46.83 per share. 

If we attribute its FY25 super earnings on post-IPO expanded equity base, then the asking price is at a P/E of 18.93, and based on its FY24 earnings, the P/E stands at 40.09. Thus, based on its recent financial data, the issue appears aggressively priced.

The company has posted PAT margins of 5.40% (FY23), 5.64% (FY24), 9.12% (FY25), and RoCE Margins of 17.70%, 17.75%, 21.32%, respectively for the referred periods. 

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

COMPARISON WITH LISTED PEERS:
As per offer document, the company has shown Likhitha Infra, Konstelec Engg., as their listed peer. They are trading at a P/E of around 14.9, and 19.7 (as of August 22, 2025). However, they are not truly comparable on an apple-to-apple basis. This comparison appears to be an eyewash.

MERCHANT BANKER’S TRACK RECORDS:
This is the 3rd mandate from SMC Capitals in the last four fiscals (including the ongoing one). Out of the last 2 listings, all listed with premium ranging from 2.76% to 15.99% on the date of listing.