Kay Cee Energy NSE SME IPO review (Apply)

• IPO Details
• Stock Price
• Docs
  • RHP
  • DRHP
  • Anchor Investor Link
• Reviews
• Subscription
• Calculator
• News
• GMP
• Allotment
• BoA
• Messages

Review By Dilip Davda on December 23, 2023

•    KCIEL is an EPC company providing power transmission and distribution system and related services.
•    The company marked growth in its financial performance for the last three fiscals.
•    Based on FY24 annualized earnings, the issue appears reasonably priced.
•    The segment is poised for bright prospects ahead with undergoing infra developments.
•    Investors may park funds for the medium to long term rewards.

ABOUT COMPANY:
Kay Cee Energy and Infra Ltd. (KCEIL) is an Engineering, Procurement and Construction ("EPC") company providing specialized services of construction and commissioning of power transmission and distribution system including overhead and underground lines, substation construction, automation etc. to various government authorities and private entities.

It undertakes EPC projects for various government entities, including but not limited to Rajasthan Rajya Vidyut Prasaran Nigam Limited ("RRVPNL"). Its service portfolio includes handling, erection, testing, commissioning of equipment and materials for power transmission & distribution System including lines, substation construction, automation, augmentation/ modification and extension of existing power system. The service portfolio of KCEIL also includes the Operation and Maintenance of 132 kV Substations, Maintenance of substations up to 400 kV Level and Maintenance of EHV Lines up to 765 kV Level including deployment of Emergency Restoration System (ERS) for breakdown maintenance etc. 

The company undertakes turnkey, partial turnkey and labour contract jobs for supply, civil, erection, testing & commissioning of all types of electrical system works for government and private entities. As on September 30, 2023, it had 15 projects in hand with an aggregate order book value of approx. Rs. 550 cr. 

With the vision of becoming a fully integrated unit it is proposing to diversify its business activities to manufacture materials required for EPC Contract of EHV transmission lines, and sub-stations, namely, line and substation hardware accessories/ items/ fittings along-with clamps and connectors up-to 765 kV, Bird Flight Diverters, Structures for Substation/ Lines and Solar Plants, Electrical Panels etc. in phased manner. The Company shall be setting up its manufacturing unit at B-16, Road No.2, IPIA, Kota -5, Rajasthan, India and is proposing to commence commercial product during the Fiscal 2025.

In addition to independently undertaking projects, it has also entered into a collaboration with other engineering companies such as Sterlite Power Transmission Limited, Jost Engineering Limited, in industry to jointly bid and execute larger projects. As of September 30, 2023, it has been awarded three projects by Rajasthan Rajya Vidyut Prasaran Nigam Limited having an aggregate value of Rs. 363 cr. which shall be executed in collaboration with Jost's Engineering Company Limited as other partner, wherein KCEIL shall be acting as the lead partner.

In addition to executing EPC projects for various public sector units and government entities, the company also undertakes EPC projects for private entities such as, Wonder Cement Limited, H G Infra Engineering Limited, Gawar Construction Limited, Raj Shyama Constructions Private Limited, DRAIPL-GCC (JV), DMIA Nyati LLP, Larsen & Turbo Limited, Sadbhav Engineering Limited, to name a few. As part of its EPC projects for private entities, it offers services including but not limited to, shifting of high voltage transmission lines, dismantling of previous transmission lines, handling, erection, installation, testing, commissioning of new transmission lines along with equipment and materials, obtaining necessary approvals for creation or shifting of transmission lines from the relevant state government authorities, etc. As of August 31, 2023, it had 339 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden book building route IPO of 2950000 equity shares of Rs. 10 each. It has announced a price band of Rs. 51 - Rs. 54 per share and mulls mobilizing Rs. 15.93 cr. at the upper cap. The issue opens for subscription on December 28, 2023, and will close on January 02, 2024. The minimum application to be made is for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.92% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO funds, the company will utilize Rs. 13.00 cr. for working capital and the rest for general corporate purposes. 

The issue is solely lead managed by GYR Capital Advisors Pvt. Ltd., and Bigshare Services Pvt. Ltd. is the registrar of the issue. Giriraj Stock Broking Pvt. Ltd. is the market maker for the company. 

After issuing initial equity capital at par value, the company issued further equity shares at a fixed price of Rs. 50 per share in September 2023. It has also issued bonus shares in the ratio of 30 for 1 in September 2023. The average cost of acquisition of shares by the promoters is Rs. 0.32 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 8.01 cr. will stand enhanced to Rs. 10.96 cr. Based on the upper cap of the IPO price band, the company is looking for a market cap of Rs. 59.18 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 35.59 cr. / Rs. 1.87 cr. (FY21), Rs. 50.13 cr. / Rs. 3.10 cr. (FY22), and Rs. 61.32 cr. / Rs. 5.51 cr. (FY23). For Q1 of FY24 ended on June 30, 2023, it earned a net profit of Rs. 1.21 cr. on a total income of Rs. 9.64 cr. Being infra sector company; it gets maximum business in the second half as per historical trends.

For the last three fiscals, the company has reported an average EPS of Rs. 5.29, and an average RoNW of 21.21%. The issue is priced at a P/BV of 0.06 based on its NAV of Rs. 924.83 (on pre bonus capital basis), and at a P/BV of 1.47 based on its post-IPO NAV of Rs. 36.82 per share (at the upper cap).

If we attribute FY24 annualized earnings to post-IPO fully diluted paid-up equity capital of the company, then the asking price is at a P/E of 12.25. Thus the IPO appears reasonably priced. 

For the reported periods, the company has posted PAT margins of 5.39% (FY21), 6.25% (FY22), 9.01% (FY23), 12.64% (Q1-FY24), and RoCE margins of 16.43%, 19.86%, 22.32%, 5.21% respectively. 

DIVIDEND POLICY:
The company last paid a dividend of 800% in March 2021 and then skipped. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Viviana Power, and KEC Intl., as their listed peers. They are trading at a P/E of 35.52 and 281.20 (as of December 22, 2023). However, they are not comparable on an apple-to-apple basis. 

MERCHANT BANKER'S TRACK RECORD:
This is the 19th mandate from GYR Capital in the last three fiscals. Out of the last 10 listings, all listed with premiums ranging from 3.79% to 179.38% on the date of listing. 

Kay Cee Energy & Infra IPO FAQs