HDFC Securities has identified various strengths and concerns of Capacit’e Infraprojects’ Rs 400 crore IPO which opens for subscription on 13 September 2017.
Capacit’e Infraprojects’ Rs 400 crore (IPO) is set to launch on 13 September 2017. There are three IPOs lined up this week starting with Matrimony.com which launched today, Capacit’e Infraprojects’ set to launch on Wednesday, and ICICI Lombard which kicks off on September 15.
HDFC Securities has identified various strengths of the Mumbai-based construction company. The research and brokerage firm says that the company has exclusive focus on Residential, Commercial and Institutional buildings in metro cities across India. According to the research firm’s report, Capacit’e Infraprojects’ enjoys large Order Book with marquee client base and repeat orders. Further, HDFC Securities points out that the company has experienced promoters, directors and management team.
The research report also notes that Capacit’e Infraprojects has a very good track record on the financial front. Capacit’e Infraprojects has grown at a rapid pace, with growth in consolidated revenue from operations being Rs. 2,142.59 million in 2014 and rising to Rs. 11,570.40 million for Fiscal 2017. The company had an Order Book of Rs. 40,024.76 million as at May 31, 2017 comprising 56 ongoing projects.
As the company is growing at a quick pace, proceeds of the issue will be used for funding working capital requirements, purchasing of capital assets and general corporate purposes.
Pointing to the concerns HDFC Securities says that the construction business is manpower intensive and hence there is significant dependency on the supply and availability of a sufficient pool of contract labourers. Due to the inherent nature of the business, there is heavy reliance on sub-contractors and third parties for supply of raw materials and non-Core Assets. Another concern is the dependence on the availability of and prices of steel and ready-mix concrete. According to HDFC Securities, the projects from certain clients contribute to a significant portion of the order book. Most of the projects are concentrated in the MMR, NCR and Bengaluru regions.
After the IPO, the company will look to expand in the mass housing segment. Capacit’e Infraprojects will also increase focus on and execute greater number of projects on a lock-and-key basis. The research report says that Capacit’e Infraprojects is set to capitalise on changes in the construction industry that will arise on account of the implementation of the Real Estate (Regulation and Development) Act.