Perfect InfraEngineers IPO – Should you Invest?

Perfect InfraEngineers IPO - Should you InvestPerfect InfraEngineers IPO – Should you Invest?

Perfect InfraEngineers IPO has opened for subscription on 30th October, 2015. Perfect InfraEngineers Limited is engaged in mechanical, electrical and plumbing business.  Its revenues grown by 1.7 times in last 5 years. It earned over 5% profits in the last financial years. What are positive factors of Perfect InfraEngineers Ltd IPO? What are the hidden factors in Perfect InfraEngineers IPO? Should you invest in such NSE SME IPO?

About Perfect InfraEngineers Limited

Perfect InfraEngineers Ltd is engaged in the business of Mechanical, Electrical and Plumbing Turnkey, Project Contracting and Engineering.

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Issue details of Perfect InfraEngineers IPO

  • IPO opens: 30-Oct-2015
  • IPO closes: 4-Nov-2015
  • Face Value: Rs 10 per share
  • Issue price: Rs 23 per share
  • Minimum Shares: 6,000 shares and in multiples of 6,000shares there-off
  • Minimum amount: Rs 138,000
  • Issue size: Rs 5.76 Crores
  • Lead Managers: Keynote Corporate Services Ltd
  • Listing: NSE Emerge
  • Download Perfect InfraEngineers Limited IPO Prospectus from SEBI Website at this link

Purpose of the IPO

  • Part finance our long term working capital requirement
  • Invest in subsidiary
  • Meet the expenses of the issue

Company Financials (reinstated)

  • Company generated revenue of Rs 15.38 Crores for the year ended Mar-11 and Rs 26.31 Crores for the year ended Mar-15. 
  • Company posted a Profit of Rs 0.69 Crores for the year ended Mar-11 and a Profit of Rs 1.56 Crores for the year ended Mar-2015.
  • Its EPS for FY 2015 is Rs 3.06 and last 3 years average EPS of Rs 2.16.

Perfect Infra Engineers IPO - Financials

Reasons to invest Perfect InfraEngineers IPO

  • Good revenue growth in last 5 years. Its revenues increased by 1.7 times in last 5 years.
  • It earned good profit of 5.9% in last financial year. However, FY2014 margins are just at 1.5%.

Reasons not to invest in Perfect InfraEngineers IPO

  • Company & its Promoter are involved in certain legal proceedings, which if determined, against it could have adverse impact on the business and financial results of the Company.
  • Condonation before the Ministry of Corporate Affairs with respect to delayed filing of Form 23/MGT 14 with RoC.
  • Company has several contingent liabilities which if materializes may adversely affect the financial position of the Company.
  • Company does not have registrations as required under respective shops and establishment Acts applicable in certain places where we have establishment.
  • Company requires number of approvals, licenses, registration and permits for its business and failure to obtain or renew them in a timely manner may adversely affect its operations.
  • There are certain discrepancies noticed in some of our corporate records relating to forms filed with the Registrar of Companies.
  • Company has experienced negative cash flows in previous years. Any operating losses or negative cash flows in the future could adversely affect its results of operations and financial conditions.
  • Company has availed financial facility in the nature of Cash Credit and Term Loan from its bankers, which includes several restrictive covenants, for which prior written approval of Bank would be required.
  • Other risk factors (Internal and external) can be viewed in prospectus Page no. 12 onwards.

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Recommendation / Investment strategy

  • At a issue price of Rs 23 and EPS of FY2015 of Rs 3.06, P/E Ratio works out to be 7.5x.  For last 3 years average EPS of Rs 2.16, P/E ratio works out to be 10.6x. There are no competitors in this business segment, hence we cannot say whether the issue price is under priced or overpriced.
  • Perfect InfraEngineers Limited revenues are showing good improvement in last 5 years. It generated good margins of 5.9% in last financial year. However, one has to watch for consistent improvement in margins. If such improved margins are seen for another year or 2 years, one can plan to invest in such stocks. Currently, I am neutral on 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. Please consult your investment advisor before you invest in such high risk investment options.

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Perfect InfraEngineers IPO – Should you Invest

Suresh KP

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