Rudra Gas BSE SME IPO review (Apply)

•    RGEL is in infrastructure segment with major focus on gas pipeline, fiber cable network.
•    The company is also in renting of construction machineries and vehicles.
•    The company posted steady growth in its top and bottom lines for the reported periods.
•    Based on its annualized FY24 earnings, the issue appears fully priced.
•    Investors may park funds for the medium to long term. 

ABOUT COMPANY:
Rudra Gas Enterprises Ltd. (RGEL) is engaged in various facets of the infrastructure sector. It is mainly engaged in gas distribution network projects, fiber cable network, renting of construction machinery and vehicles. It provides end-to-end solutions for the city gas distribution sector. 

Its services ensure the safe and efficient transportation of vital resources such as Compressed Natural Gas ("CNG") and Piped Natural Gas ("PNG"). In Fiber cable network sector, the company offers services of installations of optical Fiber cable and maintenance thereof. Its main focus is on delivering projects in a timely manner while upholding the highest standards of safety. 

RGEL's client base comprises of established players in the city gas distribution industry and telecommunication industry, both in public and private sector. Over the years, it has successfully executed more than 50 projects and its major completed projects quantify to approximately Rs. 127.08 cr. The company derive its revenue from gas pipeline projects, fiber cable projects and Renting of construction machineries and vehicles. As of October 31, 2023, it has an order book of Rs. 327.83 out of which income is booked for Rs. 75.71 cr. As of October 31, 2023, it had 512 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden IPO of 2248000 equity shares of Rs. 10 each at a fixed price of Rs. 63 per share to mobilize Rs. 14.16 cr. The issue opens for subscription on February 08, 2024, and will close on February 12, 2024. The minimum application to be made is for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.96% of the post-IPO paid-up capital of the company. The company is spending Rs. 1.42 cr. for this IPO process, and from the net proceeds, it will utilize Rs. 9.50 cr. for working capital, and Rs. 3.24 cr. for general corporate purposes. 

The issue is solely lead managed by Beeline Capital Advisors Pvt. Ltd., and Link Intime India Pvt. Ltd. is the registrar of the issue. Beeline Group's Spread X Securities Pvt. Ltd.  the market maker for the company. 

Having issued initial equity capital at par the company issued further equity shares at a fixed price of Rs. 258 per share in July 2023. It has also issued bonus shares in the ratio of 2 for 1 in July 2023. The average cost of acquisition of shares by the promoters is Rs. 2.10, and Rs. 2.11 per share

Post-IPO, company's current paid-up equity capital of Rs. 6.09 cr. will stand enhanced to Rs. 8.34 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 52.53 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a standalone basis) posted a total revenue/net profit of Rs. 28.17 cr. / Rs. 1.27 cr. (FY21), Rs. 43.96 cr. / Rs. 1.79 cr. (FY22), and Rs. 49.57 cr. / Rs. 3.52 cr. (FY23). For H1 of FY24 ended on September 30, 2023, it earns a net profit of Rs. 2.47 cr. on a total income of Rs. 34.47 cr. 

For the 7 months' period of FY24 ended on October 31, 2023, the company has (on a consolidated basis) posted a total revenue of Rs. 34.47 cr. with a net profit of Rs. 2.47. 

For the last three fiscals, it has reported an average EPS of Rs. 4.89, and an average RONW of 43.37%. The issue is priced at a P/BV of 3.34 based on its NAV of Rs. 18.87 as of October 31, 2023, and at a P/BV of 2.05 based on its post-IPO NAV of Rs. 30.77 per share.

If we attribute annualized FY24 earnings to its post-IPO fully diluted paid-p capital, then the asking price is at a P/E of 12.38. Thus the issue appears fully priced. 

For the reported periods, the company has posted PAT margins of 4.52% (FY21), 4.09% (FY22), 7.12% (FY23), 7.20% (7M-FY24), and RoCE margins of 20.48%, 21.60% 25.26%, 14.86% respectively for the referred periods. 

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

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Likhitha Infra as their listed peers. It is trading at a P/E 16.1 (as of February 02, 2024). However, they are not comparable on an apple-to-apple basis.

MERCHANT BANKER'S TRACK RECORD:
This is the 30th mandate from Beeline Capital in the last two fiscals, out of the last 10 listings, all opened at premiums ranging from 2.67% to 200% on the date of listing.