Vishnu Prakash R Pungulia IPO: Analysts see many positives, few negatives

At an upper price band, the public issue of 3.12 crore equity shares is expected to fetch the company Rs 308.88 crore, at upper price band. Of the total proceeds from the IPO, the company has reported that Rs 62.2 crore will be utilised for the purchase of equipment and machineries, and Rs 150 crore will go towards working capital requirements.

Most analysts are positive on Vishnu Prakash R Pungulia (VPRPL) as it launched its initial public offering (IPO) on August 24. The IPO for the integrated infrastructure company will be open till August 28. It is priced in the Rs 94-99 per share range.

The Jodhpur-based company, with its principal business operations in the field of water supply, railways, roadways and irrigation networks, is valued at 10.2x P/E, based on its FY23 financials with an implied market cap of around Rs 1230 crore.

For the past few years, the company has reported mostly healthy financials and a steady growth. Revenue from operations grew 40.7 percent year on year (YoY) to Rs 1,168.4 crore in FY23, and net profit grew to Rs 90.64 crore in FY23, from Rs 44.8 crore in FY22.

Earnings before interest, tax, depreciation and amortization (EBIDTA) grew 80.2 percent YoY to Rs 156.6 crore for the quarter that ended in June 2023.  The current order book stands at Rs 3,800 crore, as of July 2023, with an order book to sales ratio of ~3.3x (FY23 sales), which provides better revenue visibility ahead.

Also read: Vishnu Prakash R Punglia IPO opens today; 10 key things to know

Why analysts are positive

Peers for the company include PNC Infratech, HG Infra Engineering ( 12.9x, 12.4x,17.6x)and NCC Limited. According to analysts at Geojit Financial, the company appears to be fairly priced, compared to its peers. “The consistent top-line growth and operational efficiencies, experience of over three decades in the industry, strong support from government orders, healthy order pipeline, and new initiatives from the government to boost the sector will position the company well for growth,” they said in an IPO note.

Geojit analysts have assigned a "Subscribe" rating for the issue on a short- to medium term basis.

The company has also reported healthy Return on Equity (RoE) and Return on Capital Employed (RoCE) for a 3-year average of around 24 percent and 25 percent, respectively, while the debt-to-equity ratio stood at 0.8x in FY23, up from 1.1x in FY22.

According to Vikas Jain, Research Analyst at Reliance Securities, VPRPL has gradually increased its capabilities in terms of the size of projects executed.

The infrastructure sector, which is a key driver for the Indian economy, is likely to provide several growth opportunities to the company.

“The government initiatives in the Union budget 2023-23 on infrastructure, waste management, roads and highways could benefit the company,” the report added.

Keeping the diversified business verticals, strong financials, multiple growth opportunities and a healthy order book, Reliance has also recommended a “Subscribe” to the issue.

What are the risks?

While most analysts are positive on the stock, its concentration in Rajasthan and high rate of unsecured loans could be a challenge. In a pre-IPO note, analysts at Sushil Finance said: “The company is highly concentrated in Rajasthan, with revenue from there forming 66.86 percent of total revenue for FY23. The company has Rs 84.47 crore as unsecured loans, which are repayable on demand. Sudden recall may disrupt their operations.”

Despite the challenges and keeping in mind the positives and negatives, analysts at Sushil Finance have said that investors can look at a long- term investment in the company.

As of 2:59 pm on August 24, the issue was full subscribed.

Read more: Vishnu Prakash R Punglia IPO fully subscribed in initial hours of opening, backed by HNIs, retail

At the upper price band, the public issue of 3.12 crore equity shares is expected to fetch the company Rs 308.88 crore. Of the total proceeds from the IPO, the company will utilise Rs 62.2 crore for the purchase of equipment and machineries, and Rs 150 crore for working capital requirements.

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