Vishnu Prakash R Punglia IPO Review: Vishnu Prakash R Punglia is coming up with its Initial Public Offering. The IPO will open for subscription on August 24th, 2023, and close on August 28th, 2023.

This article will look at Vishnu Prakash R Punglia IPO Review 2023 and analyze its strengths and weaknesses. Keep reading to find out! 

Vishnu Prakash R Punglia IPO Review – About The Company

Vishnu Prakash R Punglia Limited, incorporated in 1986, is in the business of designing and constructing infrastructure projects for the Central and State Governments, autonomous agencies, and private bodies in India’s nine states and one union territory.

The company’s primary business operations are broadly divided into four categories: (i) Water Supply Projects (“WSP”); (ii) Railway Projects; (iii) Road Projects and (iv) Irrigation Network Projects.

The company has design and engineering, procurement, project management, and quality management departments, as well as a fleet of 499 construction vehicles and equipment.

In addition, the company has in-house teams to complete projects from start to finish. This minimizes its reliance on third parties for crucial commodities like ready-mix concrete, stone aggregates, and bitumen, as well as services like design and engineering, transportation, and logistics, which are required in the development and construction of its projects.

The company undertake projects on an EPC basis, with or without operation and maintenance services (“O&M”). The scope of their services includes detailed engineering of the project, procurement of key materials, and project execution at the sites with overall project management up to the commissioning of these projects. 

Additionally, the company also undertake the operation and maintenance of projects following its contractual arrangements.

Vishnu Prakash R Punglia IPO – Industry Overview

The infrastructure sector is a major economic driver in India. The industry is vital to India’s overall growth, and the government places a strong priority on implementing policies that will ensure world-class infrastructure development in the country.

To boost the expansion of the infrastructure industry, the government launched the National Infrastructure Pipeline (NIP), in conjunction with other initiatives such as ‘Make in India’ and the production-linked incentives (PLI) plan. 

As Vishnu Prakash R Punglia designs and constructs infrastructure projects for the Central and State Governments, autonomous agencies, and private bodies in India, it growth is based on the budget the government allocates for the following industries:

Water supply and wastewater management system in India

In recent years, the government has established an increasing number of projects aimed at strengthening water supply and sewage infrastructure in India. In the last seven years, schemes such as JJM, Jal Shakti, and Atal Bhujal Yojana have been established. The funding for JJM/National Drinking Water Mission in the FY24 budget has increased to ₹700 billion, a 27.3% increase from ₹550 billion in FY23.

Railway Industry

The Indian Railways is the world’s largest train network, a regulated body under the Government of India, and the backbone of the Indian economy. Indian railways operate over 9,000 freight trains and 13,500 passenger trains, transporting over 24 million people and 203 million tonnes of freight. 

It is also India’s largest employer, accounting for approximately 1.5% of GDP and accounting for over 45% of India’s modal freight. It is the driver of India’s economic growth and is considered as a safe, viable, and environmentally friendly method of transportation in the country. In Budget FY24, the government proposes a 70% year-on-year increase in budgetary allocation to railways of ₹2,400 billion.

Roads and Highway Industry

The construction of roads, bridges, airports, and railways is critical to the country’s economic prosperity. Road building is a major subsegment of infrastructure development, economic growth, and job generation. The government is currently focusing on infrastructure.

The Task Force on National Infrastructure Pipeline (NIP) has projected ₹111 trillion in infrastructure investments for FY20-FY25, with the road sector accounting for 18% of the total investment. In addition, the recently established Asset Monetization Pipeline will monetize around 1,600 billion through roads.

Vishnu Prakash R Punglia IPO – Financial Highlights

If we look at the financials of Vishnu Prakash R Punglia IPO Review we find out that their assets have more than doubled from ₹331.05 crores in March 2021 to ₹825.48 crores in March 2023. 

Their revenues also follow a similar trend, increasing from ₹487.67 crores in March 2021 to ₹1,171.46 crores in March 2023. The rise in revenues is accompanied by increasing profits, which have quadrupled from ₹18.98 crores in March 2021 to ₹90.64 crores in March 2023.

This increase in revenue and net profit numbers is accompanied by an improvement in net profit margins from 3.89% in FY21 to 7.74% in FY23.

In terms of return ratios, it has a ROE of 38.31% and a RoCE of 33.72% as of FY23. This suggests a good return on shareholders’ capital and efficient use of company resources.

The debt-to-equity ratio was reported at 0.8 for FY23 indicating that the company primarily uses its own funds to run its business.

Financial Metrics of the Company

Competitors of the Company

Following are the listed competitors of the company for its different business segments:

1. Water Supply and Waste Water Treatment Market: Ncc Ltd, Itd Cementation India Ltd, Hindustan Construction Company Ltd, and Pnc Infratech Ltd.
2. Railway Sector: Rail Vikas Nigam Ltd, Kec International Ltd, and Ircon International Ltd.
3. Road Construction Sector: GR Infraprojects Limited, H.G. Infra Engineering Limited., KNR Construction Limited, and IRB Infrastructure Developers Limited.

Strengths of the Company

• Over the years, the company has gained good experience for execution of Water Supply Projects (WSP) and has developed financial strength and managerial capabilities. This has enabled them to venture into new segments like railways, roads and various other segments
• Because of its continuing focus on its core areas and ability to effectively bid and win new projects across different segments, the company has been able to reach and maintain Order Book positions. These Order Books will give the company with long-term growth and the capacity to increase shareholder value.
• The company’s ambition to become a player in the EPC business has been reliant on its performance and capacity to establish lasting relationships with its clients.  This has been made feasible by its ability to adapt to changing client needs and successfully execute projects.
• Because of its engineering team and labour, in-house integrated model, and equipment deployment, the company has acquired a reputation for project management and execution. The company believes that these competencies have allowed them to complete projects in a successful manner.

Weaknesses of the Company

• The company’s projects are subject to subject to a completion schedule, as specified under the relevant EPC contracts. Failure to adhere to contractually agreed timelines could require us to pay liquidated damages as stipulated in the EPC contract or lead to partial or complete encashment of the bank guarantee or performance security.
• The company’s business is mostly focused in Rajasthan. and comprises of majority of its revenue. If the company fails to mitigate the concentration risk, it may not be able to develop its business effectively.
• The Company has obtained an unsecured loan of $844.72 million, which is repayable on demand. Any demand for repayment of such unsecured loans may have an impact on the company’s cash flow and financial condition.
• A major portion of the company’s revenue is obtained from only a handful of clients, and their loss might have a significant impact on its revenues.
• The company requires huge working capital which involves long implementation periods. This requires the company to obtain financing through various means. Additional debt financing could increase the company’s interest payments and may require it to comply with new restrictive covenants in its financing agreements.
• The company is dependent on its sub-contractors to perform various portions of the contracts awarded to it. Such dependency exposes the company to certain risks such as the availability and performance of its sub-contractors.

Vishnu Prakash R Punglia IPO Review – GMP

The shares of Vishnu Prakash R Punglia traded at a premium of 42.42% in the grey market on August 21st, 2023. The shares tarded at Rs 141. This gives it a premium of Rs 42 per share over the cap price of Rs 99. 

Vishnu Prakash R Punglia IPO – Key IPO Information

Promoters:  Vishnu Prakash Punglia, Manohar Lal Punglia, Sanjay Kumar Punglia, Kamal Kishor Pungalia And Ajay Pungalia

Book Running Lead Manager: Choice Capital Advisors Private Limited and Pantomath Capital Advisors Private Limited

Registrar to the Offer: Link Intime India Private Limited

The Objective of the Issue

The net proceeds from this issue will be utilized for the following purposes:

• Financing the company’s capital expenditure requirements for the purchase of equipment/machinery.
• For financing the company’s working capital requirements.
• General corporate purposes.

In Closing

In this article, we looked at the details of Vishnu Prakash R Punglia IPO Review 2023. Given the country’s infrastructural development, coupled with the company’s growth and the company’s outlook appears favourable for the future.

But as investors, it is our responsibility to check if the company is able to attain its revenue from different geographies so that it can expand its business efficiently.

What do think the future holds for the company? Are you applying for the IPO? Let us know in the comments below.

Written By Aaron Vas

By utilizing the stock screener, stock heatmap, portfolio backtesting, and stock compare tool on the Trade Brains portal, investors gain access to comprehensive tools that enable them to identify the best stocks also get updated with stock market news, and make well-informed investment decisions.