PSP Projects IPO review (Apply at your own risk)

Review By Dilip Davda on May 10, 2017

PSP Projects Ltd (PSPPL) is a multidisciplinary construction company offering a diversified range of construction and allied services across industrial, institutional, government, government residential and residential projects in India. It provides services across the construction value chain, ranging from planning and design to construction and post-construction activities to private and public sector enterprises. Historically, PSPPL has focused on projects in the Gujarat region. Now it has geographically diversified its portfolio of services and is undertaking or have bid for projects pan India. PSPPL has successfully executed a number of prestigious projects across Gujarat. One of the first major projects that it completed was the construction of the GCS Medical College, Hospital and Research Centre (managed by the Gujarat Cancer Society) in June 2012. Subsequently, it has successfully executed a number of prestigious projects, including, inter alia, the construction and interior works of Swarnim Sankul 01 and 02 at Gandhinagar, the construction of the Zydus Hospital at Ahmedabad, and various works in relation to the Sabarmati Riverfront Development project at Ahmedabad. Further, the company has completed or is currently undertaking projects for a number of reputed customers, including, inter alia, Cadila Healthcare Limited, Care Institute of Medical Sciences Limited (CIMS), Claris Injectables Limited, Emcure Pharmaceuticals Limited, Gelco Electronics Private Limited, GCS Medical College, Hospital and Research Centre (managed by the Gujarat Cancer Society), the Government of Gujarat (through the Executive Engineer, Capital Project Division), Inductotherm (India) Private Limited, Intas Pharmaceutical Limited, Kaira District Co-operative Milk Producers’ Union Limited (Amul Dairy), KHS Machinery Private Limited, Nirma Limited, Sabarmati River Front Development Corporation Limited, Torrent Pharmaceuticals Limited and WTC Noida Development Company Private Limited.

To part finance its working capital and capital expenditure requirements along with raising general corpus funds, the company is coming out with a maiden IPO of 10080000 equity share of Rs. 10 each with a price band of Rs. 205-210 via book building route to mobilize Rs. 206.64-211.68 crore ( based on lower and the higher price bands). Minimum application is to be made for 70 shares and in multiples thereof, thereafter. The issue consists of fresh equity issue of 7200000 equity shares and the rest by way of offer for sale. Issue opens for subscription on 17.05.17 and will close on 19.05.17. Post allotment, shares will be listed on BSE and NSE. Issue is jointly lead managed by Karvy Investor Services Ltd and Motilal Oswal Investment Advisors Ltd. Karvy Computershare Pvt Ltd is the registrar to the issue. Its entire equity is issued at par and has also issued bonus shares in the ratio of 3 for 1 in July 2015 and 8 for 1 in October 2016. Post issue, its current paid up equity capital of Rs. 28.80 crore will stand enhanced to Rs. 36.00 crore.

On performance front, the company has (on standalone basis) PSPPL has shown inconsistency in top and bottom lines from FY 13 to FY16. It has posted turnover/net profit of Rs. 260.97 cr. / Rs. 12.25 cr. (FY13), Rs. 214.80 cr. / Rs. 10.07 cr. (FY14), Rs. 286.97 cr. / Rs. 14.05 cr. (FY15) and Rs. 467.71 cr. / Rs. 24.93 cr. (FY16). For first nine months of the current fiscal, it has reported net profit of Rs. 21.48 crore on a turnover of Rs. 249.42 cr. If we annualize latest earnings and attribute on fully diluted equity post issue then asking price is at a P/E of around 26 plus. On a consolidated basis, it has posted turnover of Rs. 485.76 crore with a net profit of Rs. 21.82 crore. For the first nine months of the current fiscal, it has earned net profit of Rs. 20.61 crore on a turnover of Rs. 289.02 crore. If we annualize the latest earnings and attribute it on the fully diluted equity post issue, then asking price is at a P/E of 27 plus and at a P/BV of 7 plus. Thus issue appears to be fully priced one. As on 31.03.17 on consolidated basis the company has Rs. 927 crore worth orders on hand. The average cost of acquisition per Equity Share by Promoters, Prahaladbhai Shivrambhai Patel is Rs. 0.28 and Shilpaben Patel is Rs. 0.01 and the Issue Price at upper end of the Price Band is significantly higher at Rs.210.

On BRLM’s front, two lead managers have handled 7 issues in the past three years out of which 2 issues closed below the issue price on the listing day.

Conclusion: Being an issue below Rs. 250 crore, its listing will be in "T" group that will eliminate the speculative aspect for initial period. On pricing front, issue is fully priced and hence risk savvy cash surplus investors may consider investment in this issue.


Conclusion / Investment Strategy

Being an issue below Rs. 250 crore, its listing will be in "T" group that will eliminate the speculative aspect for initial period. On pricing front, issue is fully priced and hence risk savvy cash surplus investors may consider investment in this issue.

Review By Dilip Davda on May 10, 2017

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 before making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at its own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The 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

PSP Projects IPO FAQs

  1. 1. Why PSP Projects IPO?

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

  2. 2. How is PSP Projects IPO?

    Read the PSP Projects IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. PSP Projects IPO what should investors do?

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

  4. 4. Is PSP Projects IPO good?

    Sorry, we didn't rate the PSP Projects IPO.

  5. 5. Is PSP Projects IPO worth Investing?

    Our lead analyst Mr. Dilip Davda didn't rate the PSP Projects IPO.

  6. 6. When will PSP Projects IPO allotment status?

    The PSP Projects IPO allotment status will be available on or around May 24, 2017. The allotted shares will be credited in demat account by May 26, 2017. Visit PSP Projects IPO allotment status to check.

  7. 7. When will PSP Projects IPO list?

    The PSP Projects IPO will list on Monday, May 29, 2017, at BSE, NSE.

1 Comments

jainsaab
1. jainsaab  Jun 13, 2017 11:16
respected sir
sir please tell your opinion about holding of psp shares
what''s the future of psp
it will grow or not

thanking you








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