Power & Instrumentation NSE SME IPO review (May apply)

Power & Instrumentation (Gujarat) Ltd. (P&I) is a contracting firm founded in 1983 to provide complete EPC solutions for electrical requirements and manufactured electronic boards, electrical panels & controls panel. Currently it is engaged in providing a wide range of contracting based services in the field for Electrical, Mechanical and Instrumentation Engineering with complete turnkey solutions from concept to commissioning which includes Design, procurement, installation, testing & commissioning and maintenance of the system. Thus P&I is the one-stop solution provider and is preferred by major clients for repeated orders. Its client list includes Voltas, Vodafone, Ford, LIC, Bajaj Electricals etc. It has been certified by the prestigious ISO 9001-2000.

To part finance its working capital and general corpus fund needs, P&I is coming out with a maiden IPO of 1864000 equity shares of Rs. 10 each at a fixed price of Rs.33 to mobilize Rs. 6.15 crore Issue opens for subscription on 11.04.18 and will close on 13.04.18. Minimum application is to be made for 4000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge.  Issue is solely lead managed by Navigant Corporate Advisors Ltd. and Skyline Financial Services Pvt. Ltd. is the registrar to the issue. Issue constitutes 26.46% of the post issue paid up capital of the company. Having raised initial equity at par it raised further equity in the price range of Rs. 100 and Rs. 125 in March 2012 and February 2018 respectively. It has also issued bonus shares in the ratio of 4 shares for every 1 share held in February 2018. Average cost of acquisition of shares by the promoters is Rs. 1.84 and Rs. 2.38 per share. Post issue, P&I’s current paid up capital of Rs. 5.18 crore will stand enhanced to Rs. 7.04 crore.

On performance front, P&I has posted turnover/net profits of Rs. 36.33 cr. / Rs. 0.95 cr. (FY14), Rs. 45.47 cr. / Rs. 1.07 cr. (FY15), Rs. 51.66 cr. / Rs. 1.22 cr. (FY16) and Rs. 60.73 cr. / Rs. 1.57 cr. (FY17). For first nine months of the current fiscals, it has earned net profit of Rs. 1.41 cr. on a turnover of Rs. 48.56 cr. Thus it has shown slow and steady progress in top and bottom lines. For last three fiscals it has posted an average EPS of Rs. 2.71 and an average RoNW of 12.40%. Issue is priced at a P/BV of 1.42 based on its NAV of Rs. 23.32 as on 31.03.17 and at a P/BV of 1.15 based on post issue NAV of Rs. 28.66. If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 12 plus. As per offer documents, it is considering HEC Infra, Prerna Infra and MEP Infra as its listed peers which is a bit surprising. They are trading at a P/E of around 9, 6 and 22 respectively as on 06.04.18 closings.

On merchant banker’s front, this is the 10th mandate in last three fiscals. Out of last 9 listings 3 opened at a discount, 1 at par and 5 at a premium ranging from 5% to 20% on the day of listing.