About the Company

The company is engaged in the business of construction of roads including National Highways, State Highways, District Roads, Smart Roads under PM’s Smart City Mission projects, Smart Roads under Municipal Corporations, Bruhat Bengaluru Mahanagara Palike (BBMP), and Local Area Roads in various Taluka Places, etc., in the State of Karnataka.

The company is in the business of construction and requires ready-to-mix concrete, jelly, M-sand, etc., for executing the civil work. In order to execute the work on time and to reduce the cost of procurement for the above items required for the completion of civil projects, the Company has set up RMC plants at different locations as backward integration and also stock other construction materials like M-sand, jelly, iron and steel, cement, etc., required in the construction of the project.

The company operates in 4 different segments for generating revenue which are:

1. Revenue from contracts with customers
2. Sale of products
3. Toll receipts
4. Sale of services

Industry Overview

India has the second-largest road network in the world, spanning 6.372 million km as of fiscal 2022. Road transportation, the most frequently used mode of transportation in India, accounts for about ~86% of passenger traffic and close to ~64% of freight traffic as of fiscal 2022

Construction growth in the Roads and Highway sector is to be driven by the execution of high-value expressways. CRISIL Research expects investments in roads to rise 12-16% in fiscal 2023 led by a strong pipeline of awarded and under-execution national highway projects, execution of higher value expressways, and recovery in state road investments. Investments in National highways led by expressway execution are projected to rise 20-25% while state road investments are projected to grow 8-10% in FY23.

Objects of the offer

1.  Funding working capital requirements
2. General Corporate purpose

Key Financials

Valuation

As per the RHP, the company has 4 listed peers which are KNR constructions Limited, PNC Infratech limited, HG Infra Engineering Limited, IRB Infrastructure Developers Limited

1. The company’s PE on the upper price band of 35 comes to 6.36 times and the industry average PE is 19.28 times Indicating an undervalued issue compared to peers
2. The company’s PB on the upper price band of 35 is 1.63 and the average industry PB ranges from 1.17 to 3.15. Price to book value also indicates that the issue is undervalued as compared to peers

IPO Details

1.  The issue is open for subscription from 20^th March 2023 – 23^rd March 2023
2. The issue has a lot size of 428 shares with a price band of Rs.33 – Rs.35 and a retail individual investor can apply for a maximum of 13 lots worth Rs. 1,94,740/-
3. The issue size is 66 crores which is a completely fresh issue
4. As of releasing the blog the GMP is around 31% and the IPO has been subscribed 0.79 times