Rachana Infrastructure is a construction company based out of Ahmedabad, Gujarat. Incorporated in the year 2001, Rachana infrastructure is majorly involved in roads and such governmental contracts, they have built over 100 lane kms of roads every year in the last 5 years. They have also provided pipeline and irrigation works as an additional service.
They have over 400 employees and are trusted with state contracts and have a good credit rating amongst banks. Mr Girish O Raval is the managing director of the company, He founded the company before which it was operating under the proprietary firm name of Rachana Construction Co. The company has 8 closely held directors. Their vision is to consistently focus on quality and safety and to dedicatedly transform The Road Less Traveled to the Road most preferred.
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Rachana Infrastructure IPO Details
- The Company has decided to go public with an issue size of 77.97 Cr.
- IPO opens on May 20th 10.00 AM and closes June 2nd 5.00 PM IST
- Allotment date is yet to be announced.
- The lot Size 1000 shares with a price bandwidth of Rs 138 per share
- Bigshare Services private ltd are their IPO Registrar
- Interactive financial services will be their IPO lead managers
- Shares are to be listed on NSE SME
- The Listing date of the shares are yet to be announced
- Retail shares are offered at 50% of total issue
- An individual can maximum apply for 1 lots
IPO Objectives
The objectives of the IPO is as follows
- To fulfill basic working capital requirements
- For General operations and corporate purpose
- To meet public issue expenses
- For Repayment of Secured loans
Key Points on Capital Structure
There has been no change in the share capital of the company in FY 2020-21 being majorly held by the promoters. A total of 20.87 crores has been reported as long term debt. Long term debt consists of secured and unsecured loans out of which 11.11 crores belongs to advances and deposits from vendors/retention money. All the secured loans are charged against Vehicles and construction equipment.
- The Debt to Equity ratio is 0.40 which is quite high compared to industry standards
- Promoters hold 71.9%of the total equity shares
- Bhamini infrastructure limited holds 3.42% stake in the company
- The EBITDA has decreased by 55% during the financial year 2020-2021
- Current ratio is 2.26 in the FY 2020-21 when compared to a 1.52 in the FY 2019-20
- Earnings per share in FY 2020-21 was 8.94 and in FY 2019-20 it was 11.46.
- The company holds land and building held for investment purpose amounting to 21.6 crores
Revenue and operations
Rachana Infrastructure’s core business is covered majorly by Roads and Highway Construction. They have been indulging in laying roads like Four Lane Highways, Two Lanes Highways, State Highways, Major District Roads. Irrigation has also been a major part of their core business, they deal with Lift Irrigation, Development of Reservoir and Tanks, Connection of Canals and Rivers all such Mega-Irrigation Projects. They currently have a dam project and lift irrigation project works in Maharashtra.
The revenue in the FY 2020-2021 has gone down to 103.79 crores from a figure of 154.37 crores in the year 2019-20. The company’s non operating income has also gone down to 3.26 crores from a previous year figure of 4 crores.
- Direct expenses have gone down
- Salaries and wages have dropped which could mean loss of employees
- There have been no significant variations in legal expenses
- There have been no loss of assets
- All other expenses have significantly gone down which shows a reduction in operations
Strengths
- Leading road construction companies
- Long term contracts with states and large corporations
- In house project team with 400+ employees
- High promoter shareholding
- integrated portfolio of logistics services
Weaknesses
- Decline in EPS % in the last FY
- Decline in EBITDA, Cash flows and ROI
- Reduction in operations
- .High debt and unsecured loans from non banks
Conclusion
Rachana infrastructure has strong ties with the government which will never cause a question to rise upon its going concern, However the numbers show numerous risk factors which investors must take note of. The financials of the company do not post a great color on the company and the price of the share seems to be unduly high priced.
It seems to be that the negatives outweigh the positives and hence my opinion would be to wait this one out as far as investing in an IPO is concerned. Once the share is listed the true value of the company will be brought forward.
