PKH Ventures IPO cancelled; second public issue of 2023 to be withdrawn

IPO

PKH Ventures has decided to call off its public issue on the final day, citing a lacklustre response from investors. The moves makes it the second public issue to be withdrawn this year. The IPO received bids for only 65 percent of the total offer size.

In March 2023, Adani Enterprises had scrapped its Rs 20,000-crore rights issue despite the issue getting enough bids from institutional investors and high net-worth individuals.

This isn't also the first instance of a mainboard IPO withdrawal due to poor investor interest. In March 2020, Antony Waste Handling Cell Ltd faced a similar situation and recalled its initial public offering after receiving only a 50 percent subscription. However, the company later relaunched its IPO in December 2020 and successfully listed in January 2021.

Dinesh Engineers Ltd had scrapped its IPO in October 2018 after receiving only 17 percent subscription in three days.

The withdrawal for PKH Ventures came after many analysts recommended avoiding the issue because of rising debt pile and falling revenue. According to the draft papers, the debt has increased significantly to Rs 74.8 crore for the nine months ended December 31, 2022, compared to Rs 48.60 crore posted a year ago, whereas the revenue has shown a de-growth in the last three years. The firm has yet to report its March quarter and fiscal year 2023 earnings.

In its offer document, the company had said that it aimed to enhance its financial and technical capabilities through diversification into new areas within the construction and development vertical. This strategic move would enable the company to qualify for larger future projects and effectively utilise its expertise in project execution. Additionally, PKH Ventures' subsidiary, Garuda Urban Remedies Limited, had plans to establish an agro-processing cluster in the Jalore district of Rajasthan.

The company recently told CNBC that it has completed projects worth Rs 530-536 crore and has an order book of Rs 450 crore.

While these statistics throw up growth potential, analysts remained worried over the company's diversification across segments and the management bandwidth to implement them effectively.

"Some of the likely reasons for PKH ventures IPO not finding favour with institutional investors include proposed Rs 124-crore in Hydro power project, large equity relative to scale of operations, high working capital requirements, high other income and hence high PAT margins, subdued 9MFY23 results," said Deepak Jasani, head of retail research at HDFC Securities.

While PKH secured two government projects - a hydro power project in Nagpur and the Nagpur Project - its subsidiaries have bagged three government hotel development projects - the Rajnagar Garhi Project, the Pahadikhurd project, and the Tara Resort project.

"The company has no experience in developing and operating a hydropower plant and may not be successful in these endeavours. In the event of failure of execution of the hydro power project or lack of adequate generation of power, the same may adversely affect the company’s results of operations and financial condition," BP Wealth said.