Review By Dilip Davda on August 26, 2015
Sadbhav Infra Projects Ltd. (SIPL) is a wholly owned subsidiary of Sadbhav Engineers Ltd (SEL) that is now planning to enter the capital market with a maiden IPO. SEL that currently holds above 77% equity will have around 69% holding in the company post issue.
SIPL is one of the leading road BOT companies in India that specializes in the development, operation and maintenance of highways, roads and related projects. SIPL is pre-qualified on an annual basis to bid either directly or through joint ventures for DBFOT projects, subject to certain eligibility criteria, of project values up to Rs. 2650 crore by the NHAI up to December 31, 2015. It is involved in the development, operation and maintenance of national and state highways and roads in several states in India including Maharashtra, Gujarat, Rajasthan, Karnataka, Haryana, Madhya Pradesh and Telangana and border check posts in the state of Maharashtra.
The company has a project portfolio consisting of ten BOT projects of which six road projects are fully operational, one is the partially operational border check posts and the remaining three projects are in various stages of development. Nine of the ten BOT projects are toll projects (including user fee for the border check posts in Maharashtra), while the remaining one is an annuity project. Its operational projects cover approximately 1,531.16 lane kms and the projects under development cover approximately 1,061.48 lane kms. In addition, as of May 31, 2015, its Subsidiary MBCPNL completed 13 check posts and is developing 9 more check posts for its MBCPNL Project. However, these projects future hinges to Maharashtra Governments policy on Toll Free regime.
To pre-pay its high cost debts, finance, invest and advancing of sub-ordinate debt to its subsidiaries and to raise general corporate expenses fund, the company is coming out with a fresh equity issue worth Rs. 425 crore and also “offer for sale” of 6471524 equity shares by existing stakeholders. Out of the entire issue shares worth Rs. 25 crore are reserved for eligible employees. Price band for the issue is fixed at Rs. 100-103. Issue opens for subscription on 31.08.15 and will close on 02.09.15. Minimum application is to be made for 145 shares and in multiples thereon, thereafter. Post issue its existing equity capital of Rs. 310.96 crore will rise to Rs. 352.22 crore.
On performance front, despite registering CAGR of 56% in its revenues and 53% CAGR in EBITDA, it has (on consolidated basis) posted negative EPS of Rs. 6.80 for last three fiscals. It’s RONW also at negative 26.27% for the said periods. For FY15 it has reported net loss of Rs. 329.97 crore on revenue of Rs. 528.05 crore. The company may ripe benefits of Governments massive spending on roads infra developments in coming few years, but for that one has to wait and watch for the progress on that count.
BRLMs to this IPO are Kotak Mahindra Capital Co. Ltd., Inga Capital Pvt Ltd., Edelweiss Financial Services Ltd, ICICI Securities Ltd and Macquaire Capital Securities (India) Pvt Ltd. Link Intime India Pvt Ltd is the registrar to the issue.
BRLMs have mixed performances for their past mandates.
Well, the parent company SEL enjoys investors' fancy and that may lure investors to subscribe this IPO. But considering its negative P/E and RONW with longer gestation period for servicing of equity, this aggressively priced IPO may be given a miss. However, well informed and risk aver long term investors may consider moderate investment.
Review By Dilip Davda on August 26, 2015
Dilip Davda is a veteran financial journalist associated with the Indian stock market since 1978. He has been contributing to print and electronic media on capital markets, insurance, and finance since 1985.
He is widely recognized for reviewing public issues and non-convertible debentures (NCDs) in the primary market. Drawing on over three decades of market experience and close interaction with merchant bankers, his reviews focus on detailed fundamental and financial analysis of companies, with a special emphasis on SME public issues.
Dilip Davda
SEBI Registered Research Analyst – Mumbai
Registration No.: INH000003127 (Perpetual)
Email: dilip_davda@rediffmail.com
Disclaimer: The information provided herein is solely for educational and informational purposes and does not constitute an offer, solicitation, or recommendation to buy or sell any securities. Readers are advised to consult a qualified financial advisor before making any investment decisions. Investments in the securities market are subject to market risks. The author does not intend to invest in the securities discussed.
The initial public offer (IPO) of Sadbhav Infrastructure Project Ltd. offers an early investment opportunity in Sadbhav Infrastructure Project Ltd.. A stock market investor can buy Sadbhav Infrastructure IPO shares by applying in IPO before Sadbhav Infrastructure Project Ltd. shares get listed at the stock exchanges. An investor could invest in Sadbhav Infrastructure IPO for short term listing gain or a long term.
Read the Sadbhav Infrastructure IPO recommendations by the leading analyst and leading stock brokers.
Sadbhav Infrastructure IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Sadbhav Infrastructure IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts mentioned in the above answer to "How is Sadbhav Infrastructure IPO?"
Our recommendation for Sadbhav Infrastructure IPO is to avoid.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Sadbhav Infrastructure IPO.
The Sadbhav Infrastructure IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit Sadbhav Infrastructure IPO allotment status to check.
