KR Choksey recommended subscribing Likhitha Infrastructure IPO with a long-term perspective.
The public offer of oil and gas pipeline infrastructure service provider Likhitha Infrastructure has fully subscribed on the very first day of bidding, i.e. September 29.
The issue will close on October 1 and the price band has been fixed at Rs 117-120 per share.
Hyderabad-headquartered company's IPO has received bids for 51.35 lakh equity shares against offer size of 51 lakh equity shares, the data available on the exchanges showed.
The portion set aside for retail investors has been subscribed 2.5 times on first day itself, while the reserved portion of qualified institutional buyers has subscribed 1.8 percent and that of non-institutional investors 84.95 percent.
The public issue comprises a fresh issue of 51 lakh equity shares, representing 25.86 percent of post issue paid up equity. The company aims to raise Rs 61.20 crore at higher price band.
The proceeds of the IPO will be utilised towards its working capital requirements and for general corporate purposes.
"At the price band of Rs 117-120, the Likhitha issue comes priced at a PE of 8.83x FY20EPS and P/BV of 2.51X based on its NAV Rs 47.8 per share in FY20. For the last three years, Company has posted an average EPS of Rs 11.7 and Return on Net worth of 35.1 percent. While Likhitha will be the first mover in the segment, there is no average industry P/E is available," said KR Choksey which recommended subscribing the issue with a long-term perspective.
The brokerage believes the recent government initiatives have provided profitable opportunities for work execution company like Likhitha. India's pipeline network is expected to expand to around around 35,000 kms in the next 5-6 years, based on which the company is also planning to expand its pipeline laying execution capacity to a range of 250-300 kms per year.
Likhitha Infrastructure is engaged in providing oil & gas pipelines, city gas distribution projects, cross-country pipeline projects, and operations and maintenance services. It is the first company that has executed the first Trans-National Cross-Country Hydrocarbon Pipeline Project between India and Nepal. Company has strong project execution track record in last 20 years.
Company has a strong client base in India including both the private and public players such as ONGC, IGL, HCG, Indian Oil, GAIL India, etc. The company has successfully laid over 600 Kms of oil & gas pipelines including steel and medium-density polyethylene (MDPE) network in past 5 years. Additionally, the Company has laid approximately 800 kms of Oil and Gas pipelines for on-going projects.As of July 2020, it has been engaged on more than 31 on-going projects across India. Company reported revenue of Rs 161 crore, EBIT of Rs 27 crore and PAT of Rs 20 crore in FY20. It has reported robust revenue CAGR of 39 percent over FY15-FY20, and has steadily improved profitability as well, from 8.2 percent PAT margin in FY18 to 12.3 percent in FY20.