Udayshivakumar Infra IPO opens for subscription, GMP rises; should you apply? | The Financial Express

Udayshivakumar Infra IPO opens for subscription, GMP rises; should you apply?

Ahead of the listing, Udayshivakumar Infra shares were commanding a grey market premium (GMP) of Rs 10 today.

Udayshivakumar Infra has reported a mixed set of financial results over the past three years.

Udayshivakumar Infra’s Rs 66 crore IPO opened for subscription on Monday and will conclude on Thursday, 23 March. The price band for the IPO has been fixed at Rs 33-35 a share. Udayshivakumar Infra IPO comprises a fresh issue of two crore equity shares. Ahead of the IPO, the issue was opened for anchor investors on 17 March, Friday. Udayshivakumar Infra shares were commanding a grey market premium (GMP) of Rs 10 today. The shares of the company are expected to list on the stock exchanges on Monday, 3 April 2023.

10% of the IPO is reserved for QIBs, while NIIs can bid for 30% and retail investors for the remaining 60%. Retail investors can apply for a minimum 428 shares in one lot, and a maximum of 13 lots with 5564 shares, totalling to Rs 194,740. The fresh funds raised will be utilized to fund the incremental working capital requirements and for general corporate purposes, Udayshivakumar Infra said.

Udayshivakumar Infra is engaged in the business of construction of various road projects, such as national and state highways, various types of roads, such as district and smart roads, and various other road-building projects in Karnataka. The company has an in-house engineering team that deals with the building of roads, bridges, flyovers and irrigation projects. 

Should you subscribe to Udayshivakumar Infra IPO?

Swastika Investmart: Only High-Risk Investors Subscribe

“Over the last 3 years, the company has reported a mix set of financial results. The company is operating in a limited geographic location where it is dependent on a limited number of clients, especially government projects, which could be a risk. The IPO is coming at a P/E valuation of 10.51, which is fairly priced. So, finally, our view on the overall sector is bullish, but as this particular offer is very small in size, we will recommend only High-risk investors to Subscribe this IPO.”

Religare Broking: Neutral

“Over FY20-22, the company has seen mixed growth trend, wherein revenue de-grew by 2.1% CAGR while EBITDA was flat and PAT grew by 7.6% CAGR. : The company has expertise such as in-house design and engineering team which reduces dependence on outsourcing, a fleet of modern construction machinery and equipment to ensure high quality construction and skilled manpower to execute projects in a timely manner. 

“Its client base primarily consists of governmental authorities and other entities funded by the GoI. The company is primarily dependent on the projects undertaken or awarded by the Karnataka State Government. They earn a significant portion of its revenues from a limited number of clients.”

Mehta Equities: Avoid

“Given the volatile market scenario, and Udayshivakumar Infra IPO, being a micro market cap company, it would be difficult to managed or get healthy subscription response from all investor categories. While Grey market is hinting for a decent upside which is not warranted in the market mood. On valuation perse the issue is appearing to be a fully priced-in, discounting all the near-term growth potential for a company if this size, Risk of inconsistency in financials performance and questions of GST recovery from Government bodies raises concern on the issue. Investors should also take note that the initial listing will be in the T group which is also a concern looking at the size of the company. Hence a conservative investors should avoid subscribing the issue considering market mood.”

BP Equities: Subscribe

“Going forward, UIL intends to capitalize on its experience and continue to selectively pursue larger roads, bridges, and irrigation projects, both independently and in partnership with other players. Inhouse integration has been an integral part of growth over the years and the company seeks to further enhance its in-house competencies by expanding into various functional aspects of projects, thereby eliminating dependence on third parties to avoid risks and minimizing costs associated with these functions. 

“On the financial front, UIL’s EBITDA margin and PAT margin have shown an improving trend. However, the company carries concentration risk as it is primarily focused on the State of Karnataka and there has been no meaningful growth in revenues over the past few years. At the upper end of the price band, the issue is valued at a P/E of 11x based on FY2022 earnings which we feel is reasonable. Hence, we recommend a “SUBSCRIBE” rating for the benefit of listing gains.”

(The recommendations in this story are by the respective research analysts and brokerage firms. FinancialExpress.com does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)

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First published on: 20-03-2023 at 11:59 IST
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