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Karda Construction IPO review (Subscribe for Long Term)

Review By Dilip Davda on Mar 11, 2018

 
Karda Construction Ltd. (KCL) is a well established Nashik based group having its presence in the construction industry for more than two decades. Since inception the group concentrated on developing affordable housing in the residential segment and from year 2001 onwards, the group diversified into commercial segment. Our Company, Karda Constriction Limited was incorporated in 2007 with a view to corporatize the group’s activities in the real estate sector. Company is focused on quality and affordable developments. Karda has an established brand “Hari” with reputation, and a track record of developing innovative projects through our emphasis on contemporary architecture, strong project execution and quality construction in the real estate industry. KCL currently has 11 Ongoing and 3 planned projects, which is expect to provide an estimated total Carpet Area of 17,13,725 square feet. Further in order to expand its portfolio of business activities Company has recently ventured into Construction Contracts as wellto expand its horizons in other cities. Nashik's realty market is geared for rapid growth going forward given its proximity to major cities like Mumbai and Pune and current saturation of the realty markets in both these cities. Another important factor likely to influence the real estate growth of Nashik is its lower entry costs vis-a-vis Mumbai and Pune.

To finance its part repayment of overdraft limits, part repayment of loans and working capital fund needs, KCL is coming out with a maiden IPO of 4300000 equity shares of Rs. 10 each via book building route with a price band of Rs. 175 - Rs. 180 to mobilize Rs. 75.25 cr. – Rs. 77.40 cr. based on lower and upper price bands. Issue comprises of 2300000 fresh equity issue and offer for sale of 2000000 shares by the promoters. Issue opens for subscription on 16.03.18 and will close on 21.03.18. Minimum application is to be made for 80 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. Issue is solely lead managed by Aryaman Financial Services Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Issue constitutes 34.96%of the post issue paid up capital of the company. Average cost of acquisition of shares by the promoters is Rs. 5 per share. Company’s entire equity is issued at par. It has also issued bonus shares in the ratio of 4 for 5 in June 2016 and 1 for 9 in July 2017. Post issue, its current paid up capital of Rs. 10 cr. will stand enhanced to Rs. 12.30 crore.

On performance front, KCL has posted turnover/net profits of Rs. 59.07 cr. / Rs. 3.61 cr. (FY14), Rs. 46.53 cr. / Rs. 3.08 cr. (FY15), Rs. 105.93 cr. / Rs. 6.37 cr. (FY16) and Rs. 110.02 cr. / Rs. 8.03 cr. (FY17). For the first half of the current fiscal, it has earned net profits of Rs. 5.52 cr. on a turnover of Rs. 45.70 cr. For last three fiscals, it has posted an average EPS of Rs. 6.65 and average RoNW of 25.81%. Issue is priced at a P/BV of 5.01 on the basis of its NAV of 35.87 as on 30.09.17. If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 20 plus against industry composite of 40. As per offer documents, its peers are trading at a P/E of around Kolte Patil (23), Prerna Infra (5), Arihant Super (20) as on 09.03.18. Thus issue appears fully priced.

On merchant banker’s front, this is 26th mandate from its stable in the past three years (including 1 main board IPO and the rest SME). Out of last 10 listings, 4 opened at discount, 1 at par, 4 with the premium ranging from 1% to 20%. The only main board listing (Apollo Micro) opened at a premium of around 73.8% on the day of listing.


Conclusion / Investment Strategy

Issue appears fully priced. However, considering bright prospects for the low cost housing going forward and the company having major thrust for low cost housing projects, Investors may consider investment for long term.

Reviewer recommends Subscribing to the issue for Long Term.

Review By Dilip Davda on Mar 11, 2018

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

Karda Construction IPO FAQs

  1. 1. Why Karda Construction IPO?

    The initial public offer (IPO) of Karda Construction Ltd offers an early investment opportunity in Karda Construction Ltd. A stock market investor can buy Karda Construction IPO shares by applying in IPO before Karda Construction Ltd shares get listed at the stock exchanges. An investor could invest in Karda Construction IPO for short term listing gain or a long term.

  2. 2. How is Karda Construction IPO?

    Read the Karda Construction IPO recommendations by the leading analyst and leading stock brokers.

    Dilip Davda - Subscribe for Long Term
    Capital Market Review
    Khambatta Securities: Subscribe

  3. 3. Karda Construction IPO what should investors do?

    Karda Construction IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Karda Construction IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  4. 4. Is Karda Construction IPO good?

    Our recommendation for Karda Construction IPO is to subscribe for long term.

  5. 5. Is Karda Construction IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Karda Construction IPO.

  6. 6. When will Karda Construction IPO allotment status?

    The Karda Construction IPO allotment status will be available on or around Mar 26, 2018. The allotted shares will be credited in demat account by Mar 28, 2018. Visit Karda Construction IPO allotment status to check.

  7. 7. When will Karda Construction IPO list?

    The Karda Construction IPO will list on Monday, April 2, 2018, at BSE, NSE.
More Karda Construction IPO Views / Analysis / Recommendations ...

The Karda Construction IPO Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered IPO Analysts tells you if Karda Construction IPO worth investing. The Karda Construction IPO Note sets the IPO expectations in systematic way which tells you if Karda Construction IPO good to buy (good or bad / yes or no). The IPO Forecast tells you weather to invest in Karda Construction IPO by providing IPO recommendations i.e. subscribe, avoid and neutral.


2 Comments

Pranav savjiyani
2. Pranav savjiyani  Mar 20, 2018 20:29 Reply
Kya kare sir apply ya avoid pls
Riaz Khatri
1. Riaz Khatri  Mar 13, 2018 18:36 Reply
WHAT IS RERA?
The Real Estate Act makes it mandatory for all commercial and residential real estate projects where the land is over 500 square metres, or eight apartments, to register with the Real Estate Regulatory Authority (RERA) for launching a project, in order to provide greater transparency in project-marketing and execution.


HOW IS THE MERCHANT BANKER ARYAMAN BRINGING OUR NON RERA REGISTERED COMPANIES WITH AN IPO?

HOW IS THE WATCH DOG SEBI (GIVING GREEN SIGNAL) BY ALLOWING NON RERA COMPLIANT COMPANIES TO COME OUT WITH IPO.

ON WHAT BASIS IS ANALYST DILIP DAVDA GIVING A SUBSCRIBE TAG TO A NON RERA COMPLIANT COMPANY.



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