Varindera Constructions plans to mobilise Rs 1,200 crore via IPO, files draft papers with SEBI

Varindera Constructions IPO

Haryana-based Varindera Constructions plans to raise Rs 1,200 crore through its initial public offering as it has filed draft red herring prospectus with the capital markets regulator SEBI.

As per the draft papers filed on September 30, the IPO is a combination of fresh issue size of Rs 900 crore worth shares and an offer-for-sale of shares worth Rs 300 crore by the existing shareholders.

Promoter Varinder Kumar Garg and his wife Sushma Garg, who together hold 99.75 percent stake in the company, will be selling shares worth Rs 201 crore, and Rs 99 crore via offer-for-sale.

The engineering, procurement and construction (EPC) company may also raise Rs 180 crore via pre-IPO placement before the IPO launch. If it manages fund raise in pre-IPO placement, the said amount will be reduced from the fresh issue.

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Established in 1987, the Varinder Garg-owned company will utilise Rs 160.1 crore out of the net fresh issue proceeds (IPO size less the issue expenses) for purchase of equipments, and Rs 155 crore for working capital requirements. Further, Rs 359.9 crore will be used for repaying debt and the remaining funds for general corporate purposes.

Post issue, the debt burden of the company seems to be reducing significantly. The total outstanding debt stood at Rs 442.34 crore as of July 2024.

Varindera Constructions has executed 31 construction projects in the last 10 years with aggregate contract value of Rs 5,293.3 crore, across 11 states in India, and in Mauritius. Currently, it has 7 ongoing projects in Mauritius and Maldives. Overseas business contributed nearly 24 percent to revenue in FY24.

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As of March 2024, it has 20 ongoing projects in India and overseas, with an order book of Rs 3,844.8 crore including overseas projects of Rs 607.1 crore.

The company, which competes with listed peers like Ahluwalia Contracts, Capacite Infraprojects, NCC, and PSP Projects recorded decent financial performance in the past years. Net profit in the year ended March 2024 grew by 31.5 percent to Rs 143.4 crore compared to Rs 109 crore in the previous year, with strong topline and operating numbers.

Revenue from operations in the fiscal 2024 increased by 32.5 percent to Rs 1,389 crore compared to FY23. EBITDA (earnings before interest, tax, depreciation, and amortisation) in the FY24 jumped 50.5 percent to Rs 224.7 crore and margin grew by 200 bps to 16.2 percent compared to fiscal 2023.

The merchant bankers handling the issue are ICICI Securities, Equirus Capital, and IIFL Securities.