Among the various IPOs in the pipeline, Ramky Infra IPO is not to be missed. The offer is priced at Rs 405 to Rs 468 with an aim to raise Rs 530 crore. The company is a construction contractor in infrastructure space. Financially, the company is quite strong. This can be seen from the strong revenue and profit growth even during the FY09 slowdown.
The major strength of the company lies in its capacity as an Engineering Procurement and Construction and lump-sum contractor in a variety of segments. It has a strong diversified order book which stands at Rs 7,432 crore as of March 2010, with a further Rs 3,147 crore secured in the June quarter. This is five times the revenues for FY-10, showing near-term earnings visibility. The company also has a considerable expertise in the key divisions of water and waste water management, and irrigation. These segments together contribute more than half the order book and offer higher margins. Moreover, about 80% of the order book comes from various State governments.
A diverse order book provides the flexibility to change exposure to segments according to the opportunities available, build on expertise to bid for a wider variety and higher-value projects, and partner other infrastructure players to increase order inflow.
The company reported a remarkable compounded annual three-year consolidated sales growth of 43%, and net profit growth of 49% with stable operating margins at 10% even as the order book increased. It is looking forward to direct around Rs 80 crore of the issue proceeds towards acquisition of construction equipment which would further boost the operating margins. Apart from this Rs 175 crore from the issue will fund working capital. However, Rs 25 crore of issue funds will be used to payoff debt.
The IPO looks to be quite attractive for investors with a high risk appetite with a two-to-three year perspective.
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