Vishnu Prakash R Punglia Limited IPO Closed

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IPO date 24th – 28th Aug 2023
Listing date 05 Sep 2023
Type
Price range 94 – 99
Minimum order quantity 150
(D)RHP View

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Incorporated in 1986, Vishnu Prakash R Punglia Limited is an integrated engineering, procurement, and construction (EPC) company engaged in the business of designing and constructing infrastructure projects for the Central and State Governments, autonomous bodies, and private bodies across 9 States and 1 Union territory in India.

The company’s operations are broadly divided into four categories;

  1. Water Supply Projects (WSP)
  2. Railway Projects
  3. Road Projects
  4. Irrigation Network Projects

About the industry:

The infrastructure sector is a key driver of the Indian economy. The sector is highly responsible for propelling India’s overall development and enjoys intense focus from the Government for initiating policies that would ensure the time-bound creation of world-class infrastructure in the country. The infrastructure sector includes power, bridges, dams, roads, and urban infrastructure.

In order to become a US$ 5 trillion economy by 2025, infrastructure development is the need of the hour. The Government has launched the National Infrastructure Pipeline (NIP) combined with other initiatives such as ‘Make in India’ and the production-linked incentives (PLI) scheme to augment the growth of the infrastructure sector.

Historically, more than 80% of the country’s infrastructure spending has gone towards funding for transportation, electricity, and water & irrigation. Centre’s share in NIP is 39% whereas, the State and Private sector’s share is 39% and 22% respectively.

Water supply and Waste-water Management:

It is expected that by 2050, about 1,450 cubic km of water will be required out of which approx. 75% will be used in agriculture, ~7% for drinking water, ~4% in industries, ~9%for energy generation. However, because of growing urbanization, the need for drinking water will take precedence over the rural water requirements. Many of the cities are situated by the bank of rivers from where the freshwater is consumed by the population and the wastewater is disposed of back into the river, thus causing contamination of the water source and irrigation water. This has raised serious challenges for urban wastewater management, planning, and treatment.

According to the Central Pollution Control Board, the estimated wastewater generation was almost 39,600 MLD in rural regions, while in urban regions it was estimated to be 72,368 MLD for the year 2020-21. The Estimated volume in the urban cities is almost double than that of the rural regions because of the availability of more water for sanitation which has improved the standard of living.

Urban Waste Generation and Treatment:

In India, the sewage generation in the urban region was 72,368 MLD for the year 2020-21, while the installed sewage treatment capacity is 31,841 MLD. The operational capacity is 26,869 MLD, which is very low than the load generation. Of the total sewage generation only 28% i.e. 20,236 MLD was treated which implies that 72% of the wastewater is left untreated and is disposed of in various water bodies like rivers, lakes, or underground water.

Some capacity additions like 4,827 MLD sewage treatment have been proposed but a gap between the wastewater generation and treatment of 35,700 MLD i.e. 49% still remains.

Railways:

Indian railways run about 9,000 freight trains and 13,500 passenger trains carrying a total passenger count of over 24 Million passengers and more than 203 Million tonnes of freight.

The Government has proposed a 70% YoY increase in budgetary allocation of ₹2,400 Billion to Railways in Budget FY24.

During the fiscals 2020 to 2025, sectors such as energy (24%), roads (18%), urban (17%), and railways (12%) amount to around 70% of the projected capital expenditure in infrastructure in India. NIP has involved all the stakeholders in a coordinated approach to infrastructure creation in India to boost short-term as well as potential GDP growth.

Road & Highway Industry:

With a total of 6.37 Million km of road network, India ranks second in the world after the USA. This road network supports the movement of 60% of freight traffic in the country and 87% of total India’s passenger traffic.

To get the country in fast-forward mode, the development of National Highways has been a key focus area, however, state highways, district and rural roads continue to be a large part of the overall road network.

How do EPC Contracts work?

The Engineering, Procurement, and Construction (EPC) Model partnership requires the Government to undertake the total funding of the project while the Private sector partner will provide the engineering and construction requirements.

It is often identified as a limitation of the model that the cost is completely borne by the Government.

Government invites bids for engineering expertise from the contractors, Procurement of raw materials and construction costs are met by the government.

From design to commissioning, the EPC Contractor is responsible for all activities and handover of the project to the Government.

Clearly, the risk to the private participant in this model is minimal or non-existent, as it does not need to worry about the project’s finances. The government bears all the additional risks such as land acquisition, compensation, commercial, traffic, and security; the model requires the government to even finance road Construction.

So, in a sense, the EPC MODEL is a simple contract that a government delivers to a private party in order to have a job done effectively, and so it cannot be considered a PPP MODEL technically.

Objects of the issue and proceeds utilization

The Rs. 308.88 crore public offer of Vishnu Prakash R Punglia Ltd. comprises entirely a fresh issue of up to 31.2 million shares. The offer also includes a portion for eligible employees.

Purpose Proceeds (₹ crores)
Funding capital expenditure requirements to purchase machinery 58.64
Funding working capital requirements of the company 140
General corporate purposes Balance

Financial information and other valuation metrics (₹ crores)

Financial Year Total Assets Total Revenue Profit After Tax EPS EBITDA
March 31, 2021 331 487.7 19 NA 47.3
March 31, 2022 497.8 787.4 44.8 NA 88.8
December 31, 2022 743.9 714.3 50.73 10.41 93.8

Risk factors to consider:

Dependance on limit number of clients: For the nine (9) month period ended December 31, 2022, and the financial years ended March 31, 2022, March 31, 2021, and March 31, 2020, our top five (5) clients accounted for approximately 80.14%, 81.92%, 82.98% and 77.51% of our revenues from operations, respectively. The loss of any significant clients may have an adverse effect on the business, financial condition, and results of operations.

Geographical Concentration: As of December 31, 2022, the Company’s ongoing projects in Rajasthan state constitute 72.50% of their pending Order Book. the business is relatively concentrated in the northern part of India and any adverse impact in this region may adversely affect the business, results of operations, and financial condition.

Higher trade receivables and Inventories: Trade receivables and Inventories form a substantial part of the current assets and net worth of the company. As on December 31, 2022, March 31, 2022, March 31, 2021, and March 31, 2020, the trade receivables and inventories stood at 65.30%, 58.99%, 62.05%, and 62.80% of the total assets respectively.

IPO Schedule

Issue Period 24th August to 28th August 2023
Deadline for accepting UPI mandate Until 5 PM on the issue closing day
Finalization of Allotment 31st August 2023
Initiation of Refunds 1st September 2023
Credit of Shares 4th September 2023
Date of Listing 5th September 2023
Mandate end date 12th September 2023
Anchor Investors Lock-In End Date 27th September 2023

How to apply to the Vishnu Prakash R Punglia Limited IPO?

You can apply for the Vishnu Prakash R Punglia Limited IPO using any supported UPI app by following two steps:

  • Enter your bid on Kite
  • Accept the UPI mandate on your phone

On acceptance of the mandate, the bid amount will get blocked in your bank account. Click here to learn more.

How to check the allotment status for Vishnu Prakash R Punglia Limited IPO?

You can check the allotment status for the Vishnu Prakash R Punglia Limited IPO on the website of the Registrar and Transfer agent. Alternatively, you can also check the allotment status on the NSE website.