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Issue Size: Rs 45‐49 Cr; Price Band: Rs 68‐75; Issue Date: Nov 18 ‐ Nov 22, Grey Market Premium: Rs 10 ‐11
We recommend investors to avoid the issue as the company is commanding a P/E of 20‐22x which is
quite high for a small construction player like RPPIPL as other established listed players like ARSS Infrastructure
and Pratibha Industries are available at a comparatively cheap valuations.
Considering the small size of the issue and the enthusiasm in primary market speculative interest on listing
cannot be ruled out, else the IPO is a highly risky bet.
Objects of the Issue
♦ Fund margin requirement for working capital – Rs 17 Cr
♦ Investment in Capital Requirement – Rs 11 Cr
♦ Investments in SPVs for BOT projects – Rs 10 Cr
Order Book
The company’s order book stands at Rs 613 Cr as on June ’10 which is 4x its FY10 revenues gives a decent revenue
visibility going forward. With 48% of the order book comprises of Building construction work, Water Management
Project shares 24%, 16% by SEZ development projects and 6% each into Power and Irrigation projects.
Financials
The company has done a revenue of Rs 144 Cr in FY10 which has increased from Rs 41 Cr in FY06 a CAGR of 28.30%.
Net Profit stood at Rs 8 Cr in FY10 from Rs 1 Cr in FY06 witnessing a CAGR of more than 45%. Earnings per share of
the company declined from 12.10 in FY06 to 5.01 in FY10 as the company diluted equity from Rs. 2.71 Cr. In FY09 to
Rs. 16.50 Cr. in FY10.
The EBITDA margins are quite low at just about 10‐12% range in the past five years which is quite low. The industry
average is around15‐18%. The PAT margins are also squeezed at 4‐6% whereas its peers like Pratibha Industries and
ARSS Infra have margins of around 7% and 8% respectively. The debt equity ratio will come down to 0.9:1 post dilution
from 1.2:1 pre issue.
Valuations
The company’s market cap is coming to around Rs 154‐170 Cr at a lower and upper price band of Rs 68‐75. The P/E
post issue comes to around 20 times on a lower price band of 68 and 22x on an upper price band of 75 on an FY10
EPS of 3.5. The price to book value comes to 5x and 5.5x at Rs 68‐75 price band.
The valuations are on a higher side if we compare it with its peers like ARSS Infra and Pratibha Industries they are
trading at 13x and 11x respectively. P/BV is around 4.5x of ARSS Infra whereas Pratibha Industies is trading at 2.2
times its book value. We recommend investors to AVOID the issue considering its steep valuation when another
listed players are available at a cheap valuations.
Company Background
Incorporated in 1995, RPPIPL is a construction company primarily engaged in the business of infrastructure development
such as Highways, Roads and Bridges. The company has executed over two hundred Civil Construction projects
across various segments of construction and infrastructure industry since incorporation. It has also diversified its civil
works expertise into SEZ Development, Water Management Projects, Irrigation and Power Projects.
Some of the major clients of the company include NTPC (Chennai), Neyveli Lignite Corporation (Tamil Nadu), Larson
& Tubro Ltd. (Chennai), BHEL (Tamil Nadu), Lanco Infratech Ltd. (Hyderbad) etc.
The company does business in the South Indian region, covering states of Karnataka, Andhra Pradesh, Tamil Nadu
and the Union Territory of Pondicherry, Andaman Nicobar Islands. The company may face risk in diversifying to other
Geographies and pan India players expanding in Southern region.
The company is promoted by Mr Arul Sundaram and Ms A Nithya. Mr Arul Sundaram has been involved in various
litigations and has been disqualified under section 274(1)(g) of the Companies Act 1956 from being appointed / reappointed
as Director on the Board of another public limited company for a period of 5 years ending November 30,
2012.
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