HEC Infra Projects IPO – Should you Invest or not?
Ahmedabad based, HEC Infra Projects IPO would open for subscription on 10th March, 2016. HEC Infra Projects Ltd is an EPC (Engineering, Procurement and Construction) and SIRC (supply, installation Testing & Commission) contractor in the field of Electrical engineering. Company posted excellent revenue growth of 28% CAGR in last 5 years. What are the positive factors in HEC Infra Projects IPO? What are its hidden factors in HEC Infra Projects IPO?
About HEC Infra Projects Limited
HEC is an EPC (Engineering, Procurement and Construction) and SIRC (supply, installation Testing & Commission) contractor in the field of Electrical engineering. Company is a registered as a Class-I Composite Category with Central Public Works Department (CPWD). It has also been awarded contractor license from Gujarat Energy Transmission Corporation Limited (GETCO) as Class – C Contractor and is a registered EPC Contractor with Indian Farmers Fertilizer Cooperative Limited (IFFCO).
Issue details of HEC Infra Projects IPO
- IPO opens: 10-March-2016
- IPO closes: 18-March-2016
- Face Value: Rs 10 per share
- Issue price: Rs 100 per share
- Issue size: Rs 538 Lakhs
- Lead Managers: Sarthi Capital Advisors (P) Ltd
- Listing: NSE Emerge Platform
- Download HEC Infra Projects IPO Prospectus from SEBI Website at this link.
Purpose of the IPO
1. To meet the working capital requirements of the Company;
2. To meet the Issue Expenses
Company Financials (reinstated)
- Company generated revenue of Rs 4,659 Lakhs for the year ended Mar-11 and Rs 12,501.4 Lakhs for the year ended Mar-15. For 6 months ended Sep-15, it generated revenue of Rs 5,660.22 Lakhs.
- Company posted a profit of Rs 100.58 Lakhs for the year ended Mar-11 and profit of Rs 241.3 Lakhs for the year ended Mar-2015. For 6 months ended Sep-15, it generated profits of Rs 63.56 Lakhs.
- Its restated EPS for FY 2015 is Rs 16.64 and last 3 years average EPS of Rs 12.01.
Reasons to invest HEC Infra Projects IPO
- Has been posting strong revenue growth in the past few years. Its revenues grew at 28% CAGR in last 5 years.
Reasons not to invest in a HEC Infra Projects IPO
- It generated thin margins of 1.9% in FY2015 and 1.1% for 6 months ended Sep-2015.
- Company, its Promoters, Directors and Group Entities are involved in certain legal proceeding(s). Any adverse decision in such proceeding(s) may render company/them liable to liabilities/penalties and may adversely affect ITS business and results of operations.
- Company may not be able to qualify for, compete and win projects, which could adversely affect its business and results of operations.
- Company Order Book does not represent its future revenues and its actual income may be significantly less than the estimates reflected in Order Book, which could adversely affect its results of operations.
- They face competition in its business from domestic competitors. Such competition would have an adverse impact on its business and financial performance.
- Company had negative cash flows from investing activities as well as financing activities in some of the previous year(s) as per the Audited Financial Statements.
- Company has several contingent liabilities which, if materialists may adversely affect the financial position of the Company.
- Company has violated the Companies (Transfer of Profits to Reserves) Rules, 1975.
- Promoters, Directors have provided personal guarantees to certain loan facilities availed by the company, which, if revoked may require alternative guarantees, repayment of the amount due or termination of the facilities.
- NSE Emerge Platform IPO’s are trading in low quantity. One may have liquidity issues.
- Other risk factors (Internal and external) can be viewed in prospectus Page no. 19 onwards.
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Recommendation / Investment strategy
- On the issue price of Rs 100 and based on FY2015 EPS of Rs 16.64, its P/E Ratio works out to be 6x. Similarly, based on last 3 years EPS of Rs 12.01, P/E Ratio works out to be 8.3x. Means company is asking the issue price of Rs 100 in the P/E ratio of 6x and 8.3x. Its peers likeOn the issu
- Prerna Infrabuild Ltd P/E ratio is 43.45 (Highest) and MEP Infra is 19.04 (Lowest). Hence, the issue price of Rs 100 is reasonably priced.
- Company revenues have grown consistently at 28% CAGR in last 5 years. However, it generated thin margins of 1.1% for 6 months ended Sep-15. I would have been excited if margins are on higher side. High risk investors can invest in this IPO.
Disclaimer: I do not have an interest in investing in this IPO. The idea of giving positive and negative factors to investors in this article is to create awareness and education about this IPO. One should NOT constitute this as investment advice to buy or not to buy. While IPO investment is one of the best investment plans in India, there are risks involved in investing them. Please consult your investment advisor before you invest in such high risk investment options.
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HEC Infra Projects IPO Review