Kaushalya Infrastructure Development Corporation is into construction and infrastructure development. Its core business entails construction and maintenance of roads, bridges and highways. It is also into real estate. The infrastructure player also has a small presence in the hotels business, which doesn?t contribute much to its revenues.

The Kolkata-based company derives a chunk of its contracts from various government undertakings (state and central), state and public works departments. The major revenue source for the company is from construction of roads, bridges and highways.

Objective

Considering the higher end of the price band, the infrastructure company intends to raise Rs 51 crore, and of this, it plans to use around Rs 5 crore to purchase construction and infrastructure equipment. It has also earmarked around Rs 17.5 crore for acquisition of land and land development rights. The company intends to use around Rs 12 crore for investment in Build Operate and Transfer (BOT)/Build Own Operate and Transfer (BOOT) projects and joint ventures. Also, to meet its long-term working capital requirements, the company has allocated around Rs 12.04 crore.

Investonomics

The company has a multiple sector presence. It has four subsidiaries: Bengal KDC Housing Development, Kaushalya Township, Orion Abasaan and Kaushalya Nirman. Of these, the last three are involved in land trading, all of which are nascent and have a limited operating history.

It has completed nearly 31 projects. And around 16 are in the process of completion. The company has an order book of around Rs 145 crore. Projects are mainly infrastructure-related, that is, construction of roads, bridges, highways and rural electrification and development. The company aims to complete the 16 ongoing projects by July 2008.

With this offering, the company intends to foray into BOT projects. Primarily, it is the infrastructure business that contributes most to the company?s revenues.

The subsidiary, Bengal KDC Housing Development, was formed by the company by entering into a joint venture with West Bengal Small Industries Development Corporation for executing industrial, commercial, construction and development works at Midnapore in West Bengal. In this venture, the government holds 11% equity interest. It has a 12 acres land at Heerabag in Bengal, where it intends to engage in residential and commercial complexes. It has also joint ventures with private entities like Santech Communications, Rose Land.

The company has demonstrated an operating profit margin and net profit margin of around 4-5% and 5% respectively. An important thing to note here is the sustainability and stabilisation of these two paramount variables. A lot more will depend upon these two variables in the coming years.

Valuation

On the valuation front, considering the annualised earnings on a fully diluted equity basis, the company quotes a P/E of around 25(x) and 30(x) at the higher and lower end of the price band respectively. Its standalone PAT and income generated through operations, as of June 2007, is around Rs 1.09 and Rs 15.90 crore respectively. Being a relatively smaller company, investors need to track the company?s earnings on a long-term basis and invest accordingly.