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Review By Dilip Davda on January 16, 2024
• KEL is one of the leading player in EPC for electrical installations.
• It is operating on a Pan-India basis and having ongoing projects in 15 states.
• Government of India's infra push augurs well for this company.
• Based on its recent financial performance, the issue appears reasonably priced.
• Investors may consider parking funds for the medium to long term rewards.
ABOUT COMPANY:
Konstelec Engineers Ltd. (KEL) is in the business of Engineering, Procurement, and Construction/ Commissioning (EPC) contractors offering full range of EPC services in India and abroad. Its services find applications across several processing and various kinds of manufacturing industries such as oil & gas, refinery, steel, cement, pharmaceuticals, textile, hospital, health care and commercial complexes, domestically and internationally. It has designed, developed, and executed several complex and integrated projects requiring cutting-edge electrical, instrumentation and automation systems.
KEL's key offerings include engineering design and drawings, procurement, operations and maintenance, project management and construction and commissioning. It provides one-stop solution to clients for various kinds of engineering projects. KEL's expertise includes Electrical Installation, Solar Power Plant Setup, Instrumentation & Automation. It is an EPC company and specializes in delivering full-scale project management, procurement support, and detailed engineering services for various kinds of electrical infrastructure projects across India and abroad.
It acquires direct infrastructure project contracts through tender biddings or direct orders from the clients. For any contract, it procures the products on behalf of the client and provide design, construction and allied services to clients, as a bundle. Its adaptability to market demands and technological advancements enable it to tackle projects of varying sizes and complexities.
KEL is a licensed electrical contractor and have successfully completed over more than 200 Project of various size and complexities of which there were 47 Major Projects worth more than Rs. 400 Crores in India and abroad. According to the management, it is operating on a Pan-India basis having activities in 15 states. With major infra push given by the Government of India, the company has bright prospects going forward.
The company possesses the requisite resources of DG sets, hydra/ crane, testing equipment's for civil/ electrical/ instruments, commercial vehicles, manpower strength etc. to execute projects successfully. Among distinguished clientele, it has the privilege of serving a number of esteemed clients such as Reliance Industries Limited, Engineers India Limited, JSW Steel, Indian Oil, BPCL, HPCL, CPCL, MRPL, ISRO, ACC, BARC, Dangote Industries Limited, Adani, NTPC, Tata Steel Ltd, Navin Fluorine International Ltd and IGPL, etc.
It has in-house capabilities to deliver a project from conceptualization to completion with fast turnaround time from acquisition to launch to completion, which focuses on de-risking and improving return on investment. The company offers professional solutions, encompassing design and engineering services, to cater to the needs of valued customers.
The company has completed projects worth Rs. 406.54 cr. so far, and has a strong order book worth Rs. 573 cr., out of which Rs. 380+ cr. worth orders are still pending. As of the date of filing this offer document, it had 884 employees on its payroll.
ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden book building route IPO of 4100000 equity shares of Rs. 10 each and mulls mobilizing Rs. 28.70 cr. at the upper cap. It has announced a price band of Rs. 66 - Rs.70 per share. The issue opens for subscription on January 19, 2024, and will close on January 23, 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 27.15% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO funds, it will utilize Rs. 18.00 cr. for working capital, and the rest for general corporate purposes.
The issue is solely lead managed by Beeline Capital Advisors Pvt. Ltd. and Skyline Financial Services Pvt. Ltd. is the registrar of the issue. Beeline Group's Spread X Securities Pvt. Ltd. is the market maker for the company.
Having issued initial equity capital at par value, the company issued further equity shares in the price range of Rs. 100 - Rs. 200 between September 1998 and March 1999. It has also issued bonus shares in the ratio of 9 for 1 in March 2007, and 10 for 1 in July 2023. The average cost of acquisition of shares by the promoters is Rs. Negative, and Rs. 0.06 per share.
Post-IPO, company's current paid-up equity capital of Rs. 11.00 cr. will stand enhanced to Rs. 15.10 cr. Based on the upper cap of IPO price band, the company is looking for a market cap of Rs. 105.70 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 106.17 cr. / Rs. 1.90 cr. (FY21), Rs. 109.02 cr. / Rs. 3.52 cr. (FY22), and Rs. 155.00 cr. / Rs. 7.78 cr. (FY23). For H1 of FY24 ended on September 30, 2023, it earned net profit of Rs. 4.56 cr. on a total income of Rs. 94.34 cr.
For the last three fiscals, the company has reported an average EPS of Rs. 4.00 and an average RoNW of 9.07%. The issue is priced at a P/BV of 1.16 based on its NAV of Rs. 60.43 as of September 30, 2023, and at a P/BV of 1.11 based on its post-IPO NAV of Rs. 63.03 per share (at the upper cap).
If we attribute annualized FY24 earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 11.5, and based on FY23 earnings P/E stands at 13.59.
For the reported periods, it has posted PAT margins of 1.81% (FY21), 3.29% (FY22), 5.07% (FY23), 4.90% (H1-FY24), and RoCE margins of 6.89%, 9.00%, 16.81%, 7.73% respectively, for referred periods.
DIVIDEND POLICY:
The company has declared a dividend of 10% for FY23. 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 Skipper Ltd. as their listed peer. It is trading at a P/E of 46.73 (as of January 16, 2024). However, they are not comparable on an apple-to-apple basis.
MERCHANT BANKER'S TRACK RECORD:
This is the 28th mandate from Beeline Capital in the last two fiscals. Out of the last 10 listings, all listed with premiums ranging from 2.67% to 77.78% on the date of listing.
Review By Dilip Davda on January 16, 2024
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. My reviews do not cover GMP market and operators game plans. Readers must consult a qualified financial advisor before making any actual investment decisions, based the on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the recent past, SME IPOs drew the attention of investors across the board and lead to seer madness. However, as SME issues have entry barriers and continued low preference from the broking community, any reader taking decisions based on any information published here does so entirely at their own risk. The above information is based on information available as of date coupled with market perceptions. The Author has no plans to invest in this offer.
About Dilip Davda
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.
(Dilip Davda -SEBI registered Research Analyst-Mumbai,
Registration no. INH000003127 (Perpetual)
Email id: dilip_davda@rediffmail.com ).
The initial public offer (IPO) of Konstelec Engineers Limited offers an early investment opportunity in Konstelec Engineers Limited. A stock market investor can buy Konstelec Engineers IPO shares by applying in IPO before Konstelec Engineers Limited shares get listed at the stock exchanges. An investor could invest in Konstelec Engineers IPO for short term listing gain or a long term.
Read the Konstelec Engineers IPO recommendations by the leading analyst and leading stock brokers.
Konstelec Engineers IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Konstelec Engineers IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.
Our recommendation for Konstelec Engineers IPO is to subscribe.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe to the Konstelec Engineers IPO.
The Konstelec Engineers IPO allotment status will be available on or around January 25, 2024. The allotted shares will be credited in demat account by January 29, 2024. Visit Konstelec Engineers IPO allotment status to check.
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