Likhitha Infrastructure IPO – Should you invest?

Likhitha Infrastructure IPO ReviewLikhitha Infrastructure IPO Review

There are a dozen of IPOs that are lined up in the stock market now to raise funds in this bull run. Likhitha Infrastructure IPO would open for subscription on September 29, 2020. Likhitha Infrastructure Limited is an oil and gas pipeline infrastructure service provider in India. Its small size IPO of Rs 61.2 Crores only. Instead of coming through SME, this company has come as mainline IPO route. Should you invest in Likhitha Infrastructure IPO? What are the risk factors of investing in this IPO?

Also Read: Sundaram Bluechip Fund – Should you invest?

About Likhitha Infrastructure Limited

They are an Oil & Gas pipeline infrastructure service provider in India, focused on laying pipeline networks along with construction of associated facilities and providing Operations & Maintenance services to the City Gas Distribution Companies in India. Over the years, they have diversified the gamut of services being provided by Company from Cross Country Pipeline Projects (CCP), City Gas Distribution (CGD) Projects to providing Operation & Maintenance (O&M) Services to CGD Companies. Its client base comprises of established players in the Oil and Gas Industry, both in public and private sector.

Likhitha Infrastructure IPO Details

Here are the IPO issue details.

IPO Date Sep 29, 2020  to Oct 1, 2020
Face Value Rs 10 per equity share
IPO Price band Rs 117 to Rs 120 per share
Issue Size Total of Rs 61.2 Crores
Fresh issue Rs 61.2 Crores
IPO Lot Size 125 shares
Lead Managers Unistone Capital
Listing at BSE and NSE

Download Likhitha Infra IPO RHP

Objects of issue – Likhitha Infrastructure IPO

Here are the objects of the IPO issue. Company would utilize funds towards:

1) Working capital requirements

2) General corporate purpose

3) To meet issue expenses

Who are the company promoters?

Mr. Srinivasa Rao Gaddipati and Ms. Likhitha Gaddipati are the promoters of the company.

Company Financials

Here is the summary of the financial information of the company.

Fin. Year
ending
Total Revenues (Rs in Crores) Profits after tax
(Rs in Crores)
Profit %
Mar-2018 886.0 71.6 8.1%
Mar-2019 1,405.4 178.5 12.7%
Mar-2020 1,627.9 198.7 12.2%

Its average EPS in the last 3 years is Rs 11.68 and FY2020 is Rs 13.59.

What are the key strengths of Likhitha Infrastructure Limited?

Every investor should understand the company’s key strengths so that one can compare with its competitors to know how unique is such company in their business. Their investment decision would change based on these facts. Here are the key strengths of the company.

1) Company has strong presence in India and significant experience

2) Efficient Business Model

3) Strong financial performance

4) Scalability of operations

5) Strong Project execution capabilities

6) Long term relationship with clients and repeat business

7) Highly experienced Management Team

8) Diverse fleet of sophisticated equipment

What are the various strategies of Likhitha Infrastructure Ltd?

Company strategies would help investors to know what company is intending to do in the future and whether these strategies would help in revenue or margin growth. Such information would help investors to decide whether to invest for short term, medium term or for the long term. Here are the company strategies.

1) Continue to expand its operations

2) Further growth in its O&M services offerings

3) Retaining Skilled Manpower

4) Optimum Utilization of Resources

5) Continue to develop Client relationship and expand client base

6) Focus on Performance and Project Execution

7) Continue to focus on safety and environment standards

You may like: ICICI Pru ESG Fund NFO – Who can invest?

Reasons to invest in this IPO

Here are a few reasons to invest.

1) Likhitha Infrastructure is engaged in providing oil & gas pipelines, city gas distribution projects, Cross-Country Pipeline Projects, and operations and maintenance services as well. Infact, it is the first company that has executed the first Trans-National Cross Country Hydrocarbon Pipeline Project between India and Nepal. There are no other company that is doing similar business.

2) The company posted strong revenue and margin growth in the last few years. Its revenues grew by 22% CAGR revenue from operations and 41% in profit during FY2018 to FY2020. Its order book as of July, 2020 was approx. Rs 950 crore.

Risk Factors of investing in this IPO

These risk factors can impact company revenue and margins which would affect its share price. Investors should go through these points and understand these risk factors before investing.

1) Its business is dependent on a few clients and the loss of, or a significant reduction in  purchase orders from such clients could adversely affect its business and financials.

2) Some or all of its ongoing projects may not be completed within their agreed completion dates. Such delays may adversely affect business, results or operations and financial conditions.

3) Its business is subject to seasonal fluctuations.

4) Given the long-term nature of many of its projects, they face various implementation risks and its inability to successfully manage such risks may have an adverse impact on the functioning of its business.

5) For complete internal and external risk factors, you can refer the RHP of the company.

How to apply for Likhitha Infrastructure IPO?

You can follow these steps:

1) Login to your demat account

2) Visit IPO section

3) Check for Likhitha Infrastructure IPO link and click to bid

4) Select the IPO price and select bid Qty and submit

Likhitha Infrastructure IPO Tentative Dates / Timetable

Offer Open 29-Sep-20
Offer close 01-Oct-20
Finalization of Basis of Allotment 07-Oct-20
Unblocking of ABSA and Initiation of Refunds  08-Oct-20
Credit of shares to Demat Accounts  09-Oct-20
IPO Shares Listing Date  12-Oct-20

Likhitha Infrastructure IPO price valuations

1) On the upper price band of Rs 120 and EPS of Rs 13.59 for FY20, the P/E ratio works out to be 8.8x.

2) For last 3 years EPS of Rs 11.68, PE ratio is 10.2x.

3) Means, the company is asking the issue price of Rs 120 in the P/E range of 8.8x to 10.2x.

4) There are no listed peers, hence we cannot ascertain whether the issue price is under priced or overpriced.

Also Read: Angel IPO opens for subscription on 22 September – Should you subscribe?

Likhitha Infrastructure IPO – Should you invest?

Likhitha Infrastructure is an oil and gas pipeline infrastructure service provider in India. It has posted strong revenue and margin growth in the last 3 years. The IPO size is very small. These shares would be listed in “T” group with 5% circuit limit, hence speculative movement will get restricted. Investors should consider all these points while investing in such IPOs.

If you like our IPO analysis, please share it with your friends through email, on Facebook or on Twitter.

Suresh KP

6 comments

  • Mandar

    Hi Sir, I have 10000 shares each of Punj Lloyd and Birla Power Solution and both these companies are in delisted and in liquidation. Is there any of I get any money from these companies for the shareholding.

    • Punj Lloyd is not delisted. It is trading at 1.42 at 3 pm IST on 29-Sep-20. You can sell them on stock exchange. Birla Power solutions is not trading on BSE/NSE. If there are any offline buyers, you can sell, but it is unlikely to get any one

  • Desikan R

    Friends, please be aware about Mr.<> Parthasarathy. He compared HDFC Ltd with DHFL and persuaded me to invest in the DHFL NCD in 2018 which are now stuck with liquidator. Before listening to advice from Mr.<> Parthasarathy, kindly do due diligence, otherwise you might be stuck with dud investments!

    • Hello Desikan, For the sake of privacy, I have removed Parthasarathy (CFP) full name here. I would always advice investors that corporate FDs / NCDs are high risk. One can always check the facts from various websites + CFP’s, but end of the day, investors need to know what is riskier and what is not. Based on this one need to take their own investment decisions. If you have invested in DHFL NCDs in 2018 (secured), you might still get your money. If you have invested in unsecured NCDs, then you might need to wait till complete liquidation process goes on and then you would know how much money you would get it.

  • GoodWill

    I like very much for this article.

  • Alok Varma

    Thanks for the review

Leave a Reply

Your email address will not be published. Required fields are marked *