Monday, September 11, 2017

Capacit'e Infraprojects IPO

About the Issue
Capacit’e Infraprojects Limited’s IPO consist of fresh issue of equity shares worth Rs 400 crore with face value of Rs 10 per share. The minimum lot size is of 60 shares. The Issue price band is between Rs 245-250 per equity share. The issue will remain open for subscription from September 13-15, 2017. The company will be listed on both, the BSE and NSE.

Purpose of the IPO
Company would utilize the net proceeds for –
-          Funding working capital requirements
-          Funding purchase of capital assets (system formwork)
-          General corporate purposes

Company background
Capacit’e Infraprojects Ltd. is a company which was incorporated in 2012, engaged in construction of residential, commercial and institutional buildings. It provides end-to-end construction services for residential buildings, multi- level car parks, corporate office buildings and buildings for commercial purposes and buildings for educational, hospitality and healthcare purposes. Its construction includes constructing concrete building structures as well as composite steel structures. Company also provides mechanical, electrical and plumbing and finishing works.

Company operates in the Mumbai metropolitan region (MMR), the National Capital Region (NCR) and Bengaluru. The operations are geographically divided into MMR and Pune, NCR and Patna and Bengaluru, Chennai, Hyderabad, Kochi and Vijaywada. As on May 31, 2017, projects in the West Zone, North Zone and South Zone constituted, approximately 58.93%, 14.29% and 26.79% of the total projects, respectively. Its order book as at May 31, 2017 was of Rs 4,602.47 crore, comprising of 56 ongoing projects. The order book consists of 90.05% residential, 9.58% commercial and 0.37% institutional projects.

It has a reputed client base including Kalpataru, Oberoi Constructions Limited, The Wadhwa Group, Saifee Burhani Upliftment Trust, Lodha Group, Rustomjee, Godrej Properties Limited, Brigade Enterprises Limited and Prestige Estates Projects Limited.

Industry Outlook
India’s construction industry is expected to log materially faster growth, fuelled by spends in road, irrigation, rail and urban infrastructure projects over 2016-17 to 2020-21. Total spending in this period is expected to be in the range of 23-24 trillion, i.e. growth will be at CAGR of 10-12%. Over the next five years, infrastructure projects will provide the maximum construction opportunity at almost 92% of overall construction spend, owing to the central government's continued focus on roads, urban infrastructure and railways.

Some of the key initiatives that are expected to be the growth drivers in the upcoming years are affordable housing, Pradhan Mantri Awas Yojana- Housing for All by 2022, Smart Cities Mission, Slum rehabilitation and many more.

Financial Performance

Revenue of the company has grown at a CAGR of 75.4% over FY14-17. EBITDA has grown at a CAGR of 114.31% and PAT at a CAGR of 156.85% for FY14-17. As of May 31, 2017, the aggregate indebtedness (fund based and non-fund based) outstanding was Rs 477.47 crore, on a consolidated basis. Its debt-equity ratio has improved dramatically from 3.9x in FY14 to 0.51x in FY17. Its RoNW for FY15, FY16 and FY17 was 56.1%, 28.4% and 23.2% respectively.

Valuation and peer comparison

Industry’s average P/E works out 20x. As compared to its peers, we see the company’s issue price is fairly priced.

Our View
Within five years of incorporation, the company has grown at a tremendous rate. Its EBITDA margin has been in double digits and PAT margin has also been decent from past three years. Its valuations are also fair. The company has strong order book and is competent to complete the projects within time. Investors can get good returns in the long run, if the company continues to deliver such robust growth. Considering the above factors, we advise investors to subscribe for the IPO.

*40 or lower – Avoid Investment, 41 to 45 – Risky, 46 to 50 – Invest with limited exposure, 51 to 55 – Investment recommended, 56 & above – Excellent Investment.
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