Suntech Infra NSE SME IPO review (May apply)

•    The company is in the business of construction activities mainly on B2B basis.
•    It is also engaged in renting construction equipments and has an order book worth Rs. 47+ cr. as of December 31, 2024.
•    The company posted growth in its top and bottom lines for the reported periods.
•    The boosted bottom lines from FY24 onwards raise eyebrows and concern over its sustainability as it is operating in a highly competitive and fragmented segment.
•    Well-informed/cash surplus investors may park moderate funds for medium term.

ABOUT COMPANY:
Suntech Infra Solutions Ltd. (SISL) is a business-to-business (“B2B”) construction company. The Company is engaged into the business of Civil Construction Services such as Civil Foundation Works, Civil Structural Works; on direct contracting and sub-contracting basis and Renting of Construction Equipment. It has served both public and private sector clients, delivering solutions across industries such as Power, Oil & Gas, Steel, Cement, Renewable Energy, Refineries, Petrochemical Plants, Fertilizer Plants, and Process Plants.

Additionally, it contributes to urban and rural infrastructure projects, including bridges, metros, and irrigation systems. SISL’s execution capabilities have grown significantly with time, both in terms of the size of projects and the number of projects that it executes simultaneously. As at May 31, 2025, the company had 08 ongoing projects worth approximately Rs. 317.11 cr. has been confirmed based on Letter of Allocation / Purchase Order and Order Book for Construction Equipment Renting worth approximately Rs.  47.66 cr. Its expertise spans a wide range of infrastructure projects, including - Piling and Foundation work, Super Structure, Earthworks, Bridges and flyovers, Industrial and commercial structures, it also provides construction equipment rentals on a hire basis. The company is now venturing into Irrigation and Port Construction. It secures contracts generally through One-to-One negotiation and Tenders.

Geographically the company generates revenue in India from the states like Delhi, Bihar, Gujarat, Orissa, Rajasthan etc. Further the company generates revenue majorly from Civil Foundation Work. It has played a pivotal role in construction of the Bharat Mandapam, ITPO, Delhi; IOCL Refinery Expansion at Barauni & Barmer; Cement Plant of Ultratech at Kotputli, Rajasthan, Highrise Building foundation for UNTIY Group, Etc. As of December 31, 2024, its work force consisted of approximately 576 full-time employees. Further the company also employs labour based on the requirements of the project, which may amount to on an average 200 to 220 casual workers. It owns a large fleet of modern construction equipments like Hydraulic Rotary Piling Rigs, Hydraulic Diaphragm Wall Grab, Concrete Boom Placer, Crawler Crane, Vibro Hammer etc. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route combo IPO of 5161600 equity shares of Rs. 10 each to mobilize Rs. 44.39 cr. at the upper cap. It has announced a price band of Rs. 81 – Rs. 86 per share. The issue consists of 3974400 fresh equity shares worth Rs. 34.18 cr. at the upper cap and an Offer for Sale (OFS) of 1187200 shares worth Rs. 10.21 cr. at the upper cap. The issue opens for subscription on June 25, 2025, and will close on June 27, 2025. The minimum number of shares to be applied is for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.66% of the post-IPO paid-up capital of the company. From the net proceeds of the fresh equity issue, it will utilize Rs. 12.21 cr. for working capital, Rs. 12.51 cr. for capex on purchase of construction equipments, and the rest for general corporate purposes. 

The IPO is solely lead managed by GYR Capital Advisors Pvt. Ltd., and MAS Services Ltd., is the registrar to the issue. Giriraj Stock Broking Pvt. Ltd., is the market maker. GYR Capital Advisors Pvt. Ltd. is a syndicate member, and Intellect Stock Broking Ltd. is a sub-syndicate member.

The company has issued initial equity shares at par value, and issued further equity capital in the price range of Rs. 20 – Rs. 290 per share between January 2010, and October 2023. It also issued bonus shares in the ratio of x for x in January 2013, x for x in April 2024. The average cost of acquisition of shares by the promoters / selling stakeholders is Rs. NA, Rs. 0.49, and Rs. 0.98 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 15.39 cr. will stand enhanced to Rs. 19.36 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 166.52 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 72.32 cr. / Rs. 3.03 cr. (FY22), Rs. 86.19 cr. / Rs. 5.76 cr. (FY23), Rs. 96.26 cr. / Rs. 9.25 cr. (FY24). For 9M of FY25 ended on December 31, 2024, it earned a net profit of Rs. 10.28 cr. on a total income of Rs. 91.25 cr. Quantum jump in bottom lines from FY24 onwards raise eyebrows and concern over its sustainability going forward, as the company is operating in a highly competitive and fragmented segment.

For the last three fiscals, the company has reported an average EPS of Rs. 4.78 and an average RoNW of 21.73%. The issue is priced at a P/BV of 2.71 based on its NAV of Rs. 31.74 as of December 31, 2024, but its post-IPO NAV data is missing from offer documents.

If we attribute FY25 super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 12.15. Based on FY24 earnings, the P/E stands at 18.03. The issue relatively appears fully priced. Its debt-equity ratio of 1.64 as of December 31, 2024 raises alarm.

For the reported periods, the company has posted PAT margins of 4.22% (FY22), 6.72% (FY23), 9.67% (FY24), 11.45%, (9M-FY25), and RoCE margins of 11.90%, 17.85%, 17.28%, 14.14%, respectively for the referred periods. 

DIVIDEND POLICY:
The company not paid 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.

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown Crown Lifters, and ITD Cementation, as their listed peers. They are trading at a P/E of 21.4, and 37.1 (as of June 20, 2025). However, they are not truly comparable on an apple-to-apple basis. These comparisons appear to be an eyewash.

MERCHANT BANKER’S TRACK RECORD:
This is the 43rd mandate from GYR Capital in the last five fiscals including the ongoing one.  From the last 10 listings, 1 listed at par and the rest with a premium ranging from 4.18% to 95.26%, on the listing date.