Salasar Techno Engineering IPO – Should you invest?
Salasar Techno Engineering IPO – Should you invest?
Delhi based Salasar Techno Engineering IPO would open for subscription on 12th July, 2017. Salasar Techno Engineering Ltd is leading provider of customised steel fabrication and infrastructure solutions in India. Its consolidated revenues grew at 16% CAGR in last 5 years. What are the positive factors in Salasar Techno Engineering IPO? Are there any hidden factors in Salasar Techno Engineering Ltd IPO? Why Salasar Techno Engineering IPO would be traded in “T” Segment? In this article, I would provide some interesting insights and do Salasar Techno Engineering IPO Review.
About Salasar Techno Engineering Ltd
Company is a provider of customised steel fabrication and infrastructure solutions in India for Telecommunication Towers, Transmission Towers & Substation Structures and Solar Module Mounting Structures. The objective of Company is to supply customized, high-quality material to its impressive and ever-growing clientele. company provide 360 degree solutions by carrying out engineering, designing, fabrication, galvanization and deployment. Products include Telecommunication Towers, Power Transmission Line Towers, Smart Lighting Poles, Monopoles, Guard Rails, Substation Structures, Solar Module Mounting Structures and Customized Galvanized & Non-galvanized steel structures. services include providing complete engineering, procurement and control for projects such as Rural Electrification, Power Transmission Lines, and Solar Power Plants.
Salasar Techno Engineering IPO Issue details
- IPO open date: 12-Jul-2017
- IPO close date: 17-Jul-2017
- Face Value: Rs 10 per share
- Issue price: Rs 108 per share fixed
- Issue size: Rs 35.8 Crores
- Salasar Techno IPO Lot size: 125 shares and in multiples of 125 shares there-of.
- Minimum investment: Rs 13,500
- Leading Managers: Sarathi Capital Advisors
- Listing: BSE / NSE
- Download Salasar Techno Engineering IPO Prospectus at this link.
Objects of the Salasar Techno Engineering Ltd IPO issue
1. To meet the working capital requirements of the Company including margin money;
2. General Corporate Purpose;
3. To meet the Issue Expenses
Company Financials (reinstated-consolidated)
1) The company generated revenue of Rs 212.9 Crores for the year ended Mar-12 and Rs 384.6 Crores for the year ended Mar-17.
2) The company posted a profit of Rs 4.9 Crores for the year ended Mar-12 and profit of Rs 20.7 Crores for the year ended Mar-17.
3) Its restated basic consolidated EPS for FY ending Mar-17 is Rs 20.8 and last 3 years EPS was Rs 15.17.
Company Financials (reinstated-Standalone)
1) The company generated revenue of Rs 167.5 Crores for the year ended Mar-12 and Rs 373.2 Crores for the year ended Mar-17.
2) The company posted a profit of Rs 3.0 Crores for the year ended Mar-12 and profit of Rs 18.4 Crores for the year ended Mar-17.
3) Its restated basic standalone EPS for FY ending Mar-17 is Rs 18.45 and last 3 years EPS was Rs 13.42.
What are Salasar Techno Engineering Key Strenghts?
Here are Salasar Techno Engineering strengths.
a) Business Agreement with Ramboll
b) Steady financial performance
c) Optimum Galvanizing Capacity
d) Customer Centric Approach
f) Visible growth through a robust order book and excellent pre-qualification credentials
What are its Key Strategies?
Company is focusing on few key strategies.
1) Increasing Installed Capacity and Expanding the Product Portfolio
2) Expanding Design and Engineering Capabilities
3) Targeting New Customer Accounts and Expanding Existing Ones
4) Developing Camouflaging Capabilities for Monopoles
Reasons to invest in Salasar Techno Engineering IPO
1) Company consolidated revenues grew at 16% CAGR in last 5 years. Even its standalone revenues grew at 22% CAGR in last 5 years.
2) Its profits are in increasing mode. It earned around 5% margins for FY17.
Risk Factors / Reasons not to invest in a Salasar Techno Engineering Ltd IPO
- Company issue size is only Rs 35.8 Crores which < 250 Crores and these would be traded in “T” Segment due to this. Means you cannot buy and sell immediately after listing unless you take the delivery of the stocks. This would make stocks un-attractive and less chances of stock price appreciation.
- Application is pending with under Enforcement Department, Securities Exchange Board of India (“SEBI”) for settlement of adjudication proceedings. Any liability on account of said proceedings which may have adverse effect on business and financial position of Company.
- Increase in the cost of, or a shortfall in the availability of raw materials, and in particular, Steel shapes & sections and Zinc, could have an adverse effect on business, results of operations and financial condition.
- Within the parameters as mentioned in the chapter titled ‘Objects of this Issue’ beginning on page 89 of this Prospectus, Company’s management will have flexibility in applying the proceeds of this Issue. The fund requirement and deployment mentioned in the Objects of this Issue have not been appraised by any bank or financial institution.
- Company have not made any alternate arrangements for meeting working capital requirements for the Objects of the Issue. Further company have not identified any alternate sce of financing the ‘Objects of the Issue’. Any shortfall in raising / meeting the same could adversely affect growth plans, operations and financial performance.
- Decrease in Sales of wholly owned subsidiary, Salasar Stainless Limited in last three financial years.
- Inability to effectively manage growth or to successfully implement business plan and growth strategy could have an adverse effect on business, results of operations and financial condition.
- Any delay or default in payment from customers could result in the reduction of profits and affect cash flows.
- Information relating to production capacities and the historical capacity utilization of production facilities included in this Prospectus is based on certain assumptions and has been subjected to rounding off, and future production and capacity utilization may vary.
- There are outstanding litigation by/against Company, Subsidiary Company, Promoters, Directors and Group Entities and any adverse outcome in any of these proceedings may adversely affect profitability and reputation and may have an adverse effect on results of operations and financial condition.
- Company and Subsidiary had deposited cash during demonetization period.
- Company had negative cash flows from operating activities, investing activities as companyll as financing activities in some of the previous year(s) as per the Restated Standalone Financial Statements and the same are summarized as under
- Other risk factors (Internal and external) can be viewed in the draft prospectus.
Recommendation / Investment strategy – Salasar Techno Engineering IPO
1) On the issue price band of Rs 108 and on standalone FY17 EPS of Rs 18.15, P/E ratio works out to 5.8x. Even based on last 5 years standalone EPS of Rs 13.42, P/E ratio works out to 8x. Means, company is asking issue price of Rs 108 for the P/E ratio 5.8x to 8x. Its listed peers like KEC International, Skipper Ltd is trading at 22.8x to 18x P/E ratio. Hence Salasar Techno Engineering IPO Price is reasonably priced.
2) Company standalone revenues grew at 22% CAGR in last 5 years. It earned around 5% margins in FY17. Salasar Techno Engineering IPO price is also reasonably priced. However, this stock would be traded on “T” segment, hence immediate price appreciation cannot be be expected if someone purchases this stock on listing day or later. High risk investors can invest in this IPO with 2-3 years time frame. If you get some listing gains, you can do party.
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. Please consult your investment advisor before you invest in such high risk investment options.
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Salasar Techno Engineering IPO – Should you invest