Rudrabhishek Enterprise NSE SME IPO review (May apply)

Rudrabhishek Enterprise Ltd. (REL) that started as a service provider expanded its service portfolio to Infrastructural services, Urban Designing and Planning, Global Information system, Building Designing service and Project Management service.  REL is an ISO 9001:2008 Certified Company which follows good management practices. Considering its servicing portfolio, REL is a “One Stop Solution” for its clients. Some major corporate clients of the Company include Ansal API, Emaar MGF Land Limited, Gannon Dunkerley & Co. Limited, Hyundai Motor India Private Limited, Omaxe Limited, Paarth Infrabuild Private Limited etc. Apart from the corporate clients mentioned above, the Company has been empanelled with 30+ Government Development Authority Departments for its services.

With the team of highly experienced personnel, REL provides various infrastructure consultancy services such as Urban Infrastructure Plan, Smart City Projects, Pradhan Mantri Awas Yojna, Street Vendor Mapping Plan, City Water Supply schemes; Solid waste management system; Electrical Distribution System, Storm Water Drainage system including rain water harvesting system and preparation of detailed drawings and plan for execution of same.

To part finance its working capital and general corporate fund needs, REL is coming out with a maiden IPO of 4569000 equity shares of Rs. 10 each with a fixed price of Rs.41 per share to mobilize Rs.18.73 cr. Issue opens for subscription on 29.06.18 and will close on 05.07.18. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Issue is jointly lead managed by Khambatta Securities Ltd. and Corporate Capital Ventures Pvt. Ltd. Skyline Financial Services Pvt. Ltd. is the registrar to the issue. Issue constitutes 26.35% of the post issue paid up capital of the company. Having issued initial equity at par, it raised further equity at a price of Rs. 50 per share in January 2018. It has also issued bonus shares in the ratio of 20 for 1 in September 2017. Average cost of acquisition of shares by the promoters is Rs. 0.48 and Rs. 5.54 per share. Post issue, REL’s current paid up capital of Rs. 12.77 cr. will stand increased to Rs. 17.34 cr. It has paid a dividend of 100% for last five years in a row. 

On performance front, for last four fiscals, REL has (on a consolidated basis) posted turnover/net profits of Rs. 33.41 cr. / Rs. 5.36 cr. (FY14), Rs. 38.66 cr. / Rs. 5.68 cr. (FY15), Rs. 39.35 cr. / Rs. 6.84 cr. (FY16) and Rs. 34.23 cr. / Rs. 3.76 cr. (FY17). For first nine months ended on 31.1217 of FY18, it has earned net profit of Rs. 1.99 cr. on a turnover of Rs. 35.31 cr.  After good bottom lines for FY 14 to FY 16, it suffered a setback for FY17 onwards. Currently it has an order book worth Rs. 130+ crore. For last three fiscals it has posted an average EPS of Rs. 4.84 and an average RoNW of 18.12%. Issue is priced at a P/BV of 1.29 on the basis of its NAV of Rs. 31.68 as on 31.12.17 and at a P/BV of 1.20 on the basis of post issue NAV of Rs. 34.09. If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 27 against industry average P/E of 41. As per offer documents it has shown Dhruv Consultancy, S S Infra, Mitcon Consultancy and Artefact as its listed peers who are currently trading at a P/E of around 22, 9, 402 and 0 (as on 19.06.18). As on 31.12.17, its debt were 0.12% of shareholder’s fund.

On merchant banker’s front, this is the first mandate from Khambatta Securities and thus has no track record. From Corporate Capital this is the sixth mandate in last three fiscals. Out of last 5 listings, 1 opened at discount to offer price, and the rest opened with a premium ranging from 0.70% to 8.75% on the day of listing.