The New Delhi based EPC company is entering the capital markets with an IPO. The company proposes to issue 29, 90,000 equity shares of Rs 10 FV in the price band of Rs 230 -240. The issue will open on 29-06-10 and close on 02-07-10. The issue constitutes 28.50% of the post issue paid-up equity capital.
Promoters : Avinash C. Gupta, Arjun Gupta and Nakul Gupta.
COLLINS STEWART INGA PRIVATE LIMITED are the sole BRLM.
BUSINESS:
Technofab Engineering provides EPC services to domestic and overseas markets across a number of industrial and infrastructure sectors, which includes conventional power, nuclear power, oil & gas, water & waste-water treatment, electrical distribution & rural electrification and other industrial, & infrastructure sectors. Apart from India, the company has presence in international markets like Ethiopia, Kenya and Fiji.
The Company is in the EPC business for the last thirty-eight years and has developed expertise in the line of operations by to minimizing overheads, cost control and prevent overruns on project schedules along with strong skills in construction and contract management. This has contributed towards securing multiple orders received from customers like Lanco Infrastructure, BHEL, NPCIL, NTPC, amongst others. The company has a record of accomplishment in designing, manufacturing, procuring, constructing, commissioning and servicing various systems and equipments.
FINANCIALS:
The company has achieved a turnover of Rs 200.37cr, PAT of Rs 19.09 cr for FY 2010, as against the turn over of Rs 149.56 cr and PAT of Rs 11.68 cr for the FY 2009.
OBJECTS OF THE ISSUE:
The company intends to utilize the funds - to meet long-term working capital requirements (Rs 30cr), for financing the procurement of construction equipment (Rs 15.35cr), to set up maintenance and storage facility for construction equipment (Rs 5cr) and for setting up of training center for employees (Rs 5.40cr).
MATTERS OF CONCERN / RISKS:
• Company relies substantially on government-owned and government-controlled entities for our work orders. Political or financial pressures may cause a decrease in Government spending on public sector projects, which could adversely affect the growth.
• The standard conditions in contracts typically awarded by clients including government-owned and government-controlled entities are that they have the right to terminate the contract at any time, without assigning any reason.
• Technofab is exposed to significant risks on fixed-price or lump sum turnkey contracts and high working capital requirements.
• The Company is presently carrying out projects in Ethiopia, Fiji and Kenya and is bidding in several other African countries, some of them are unstable political economies.
VALUATION:
The EPS for FY 10 on post issue capital is around Rs 18/-. At the upper price band, the company demands a valuation of 13x. Compares favorably with the other listed players like Shriram EPC (21PE) and Vascon Engineers (27 PE). The company has 27 on going projects. Growth oriented. Fitch IPO grade -3. INVEST.