Vishnu Prakash R Punglia Limited IPO

Highlights

Vishnu Prakash R Punglia Limited (VPRPL) is an integrated engineering, procurement, and construction (EPC) company. It also has ISO 9001:2015 certification. It has experience designing and building different infrastructure projects for the Central and State Governments, autonomous bodies, and private bodies. The principal business of the company splits into 4 categories: (i) Water Supply Projects (WSP) (ii) Railway Projects (iii) Road Projects (iv) Irrigation Network Projects.

The company’s major projects include constructing, designing, building, implementing, operating, maintaining and developing WSPs including Water Treatment Plants (WTPs) along with pumping stations and laying of pipelines for the supply of water, as well as other projects such as Roads, Bridges, Tunnels, Warehouses, Buildings, Railway Buildings including platforms, stations, quarters, administrative buildings, Rail-Over-Bridges and Waste Water Treatment Plants (WWTPs).

VPRP has design and engineering, procurement, project management, and quality management teams, as well as a fleet of 499 construction equipment and vehicles. Company projects are completed by in-house teams from design to completion.

The company works on EPC projects with or without operation and maintenance services (O&M). Company services comprise thorough engineering of the project, procurement of vital materials, and project execution at the sites with overall project management up to project commissioning. Furthermore, the organization operates and maintains projects in compliance with their contractual agreements.

Rs 621 mn of the IPO proceeds will be intended to be utilised for the capex requirement of purchasing equipment/machinery such as Earthmoving Equipment, Construction Equipment, Soil Compacting Equipment, Plant Equipment and material handling equipment and vehicles. The Company proposes to utilise Rs 1,500 mn from the Net Proceeds towards funding its working capital requirements in FY24 and the rest amount will be utilised for general corporate purposes.

Key Highlights

• VPRP is an EPC company mainly focused on Water Supply Projects (WSPs) which constitute 78 pct of its outstanding order book. It is also present in projects related to railways, roads and irrigation. Rajasthan constitutes the largest share in its order book at 62 pct.
• The company’s in-house integrated model ensures that products and services required for the development and construction of a project meet quality standards and are delivered in a timely manner, thus reducing contractual risks associated with third-party suppliers.
• VPRPL will benefit from a variety of government efforts such as PM Gati Shakti, Swachh Bharat Mission (Urban) 2.0, and Atal Mission for Rejuvenation and Urban Transformation, in infrastructure, waste management, and the road and highway industry. There is plenty of room available for the company to grow in this industry.
• As of July 15, 2023, VPRPL had a Rs 38,000 mn order book, which is 3.3x its FY23 revenue of Rs 11,680 mn. This significant growth in order book has translated into strong revenue growth of 55 pct CAGR over FY21-23.
• Over the course of FY21–23, the return ratios, such as RoE and RoCE, remained robust at about 24 pct and 25 pct, respectively, on a three-year average. Additionally, the debt–to–equity ratio decreased to 0.8x from 1.1x in FY22.

Key Risks

• There are certain outstanding litigations in which the company is involved, Company may face the risk of debarment/ban on account of certain pending litigation, which, if determined adversely, may affect the business operations and the reputation of the company.
• The WSP segment and the state of Rajasthan contribute significantly to the company’s revenue. Therefore, any negative influence on this market or the region may have a negative impact on its operations, results, and business.

Valuation

At the upper end of the price band, the issue is quoting at a PE of 13.6x its FY23 earnings. Considering VPRPL’s niche focus on Water Supply Projects, and demonstrated track record of high growth with margin expansion and decent valuations, one can Subscribe for the long term.

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Disclaimer: The views expressed in the blog are purely based on our research and personal opinion. Although we do not condone misinformation, we do not intend to be regarded as a source of advice or guarantee. Kindly consult an expert before making any decision based on the insights we have provided.