Vishnu Prakash R Punglia IPO opens today. Should you subscribe to the issue?

Analysts gave a thumbs-up to the issue considering the company's consistent topline growth, healthy order pipeline and operational efficiencies.

Reliance Securities: Subscribe

With the Union budget 2023-23, the company stands to benefit from various government initiatives in infrastructure, water waste management, road and highway Industry, as per Reliance Securities.

"In view of diversified business verticals, strong financials, multiple growth opportunities and a healthy order book, we recommend a 'subscribe' to the issue," the brokerage said.

Geojit: Subscribe - short to medium term

"At the upper price band of Rs 99, VPRPL is available at a P/E (price-earnings) of 13.6 times (FY23), which appears to be fairly priced compared to its peers. The consistent topline growth and operational efficiencies, experience of over three decades in the industry, strong support from government orders, healthy order pipeline, and new initiatives from government to boost the sector will position the company well for growth," said Geojit, assigning a 'Subscribe' rating to the issue on a short to medium term basis.

Swastika Investmart: Apply

The company is focused on water supply projects and is benefiting from various government initiatives. VPRPL has a track record of successfully completing projects and has achieved notable growth through a robust order book. The company also has an in-house integrated model that helps it to successfully implement its projects.

However, as VPRPL is in the construction industry, it faces stiff competition and high working capital requirements. There is also the risk of project implementation delays and cost overruns. VPRPL has also reported negative cash flow in recent years, said Anubhuti Mishra, Equity Research Analyst at Swastika Investmart.

"Despite these challenges, the IPO is coming at a fair valuation (P/E) of 9.5 times. Our overall outlook on the infrastructure sector is bullish, and we recommend applying for this IPO," the analyst said.

Anand Rathi, too, echoed a similar view, assigning 'Subscribe–long term' rating to the IPO. "On the valuation front, we believe the company is fairly priced," it said.

Ahead of issue opening, the construction company has mobilised Rs 91.77 crore via anchor book on August 23.

A total of 13 foreign investors and domestic institutions participated in the anchor book round including Quant Mutual Fund, Max Life Insurance Company, Kotak Mahindra Life Insurance Company, Societe Generale, Minerva Emerging Opportunities Fund, Copthall Mauritius Investment, and BNP Paribas Arbitrage.

In a filing to the exchanges, the company said it has finalised the allocation of 92.7 lakh equity shares to anchor investors, at Rs 99 per share.

The IPO consists of entirely a fresh issue offering of up to 3.12 crore equity shares. The offer also includes a reservation for a subscription by eligible employees.

About 50 percent of the offer has been aside for qualified institutional buyers, 15 percent for non-institutional investors and the remaining 35 percent for retail investors.

The IPO will fetch Rs 293.28 crore and Rs 308.88 crore at the lower and upper end of the price band, respectively.

1) Funding capital expenditure requirements.

2) Funding working capital requirements of the company.

3) General corporate purposes.

1) The company's projects are exposed to various implementation and other risks, including risks of time and cost overruns, and uncertainties, which may adversely affect their business.

2) The company derives a significant portion of its revenue from the execution of water supply projects (WSPs).

3) This business is working capital intensive involving relatively long implementation periods. they require substantial financing for their business operations.

4) The company has reported certain negative cash flows from its operating activity, investing activity, and financing activity.

5) A significant portion of their revenues is concentrated from a limited number of clients.

6) The company operates in the construction industry where there are low entry barriers (high competition).

Vishnu Prakash R Punglia had recorded a net profit of Rs 44.85 crore in the year ended on March 31, 2023 as against a net profit of Rs 18.98 crore in the year-ago period. The company's revenue from operating improved to Rs 785.61 crore from Rs 485.73 crore during the period under review. As on July 15, 2023, it's order book stood at Rs 3,799.53 crore.

Choice Capital Advisors Private Limited and Pantomath Capital Advisors Private Limited are the book-running lead managers to the issue while Link Intime India is the registrar. The equity shares are proposed to be listed on both BSE and NSE.