May 7, 2015

Should you invest in PNC Infratech IPO

Purpose of the PNC Infratech IPO

The company has come out with IPO to accomplish the following purposes:

1. Fulfilling working capital requirements;

2. Investment in Capital Requirements;

3. Part-financing the Raebareli-Jaunpur Project;

4. Repayment of certain debt;

5. Other General Purposes.

Financial Performance of PNC Infratech Limited

1. Company has shown a consistent growth in revenue except in the last fiscal year 2013-14, where the company had reported revenue of Rs.1,145 crore i.e. downfall in the revenue growth due to escalated prices of fuel.

2. Company has also shown good profit figures and reported profit of Rs.67 crore in the last fiscal year.

3. For the first nine months ended 31st December, 2014 company has earned revenue of Rs.1,097 crore and posted profit of Rs.66 crore.

4. The company has reported last 3 years weighted average EPS of Rs.16.06 per share and Rs.15.68 for the nine months ended 31st December, 2014.


Turn on Points

1. Consistent Growth with a slight set back in the last fiscal year. But if we see the revenue of first nine months of current fiscal year, the company is looking back on track.

2. Sustained Profit of around 6% in the last 5 years.

3. Received bonus from National Highway Authority of India (NHAI) for completing the four-laning road project of the Agra-Gwalior section of National Highway 3.

4. Vast experience of working in almost every state of India.

Turn off Points

1 Various income tax, sales tax, service tax and entry tax proceedings are pending against the company amounting to Rs.68 crore, which if materialize could have adverse effect on the business of the company. In addition to above few civil proceedings amounting to Rs.14 crore are also pending against company.

2. Five Directors of the Company are involved in certain legal proceedings which if found guilty may result into serious damage to the company management.

3. Since the company is engaged in the business of construction any delay in completing the projects may results into heavy loss due to high prices and penalties.

4. Company’s projects are majorly of Government or Government Funded entities or agencies and any change in the Government Policies may adversely affect the business operations.

5. Other than fiscal year 2013 and 2014, Company has not declared any dividend in the last five years i.e. from year 2007 to year 2012.

Should you invest in PNC Infratech IPO?

1. For the nine months ended 31st December, 2014 company has reported EPS of Rs.15.68, if we annualize these earning than at the asking price band of Rs.378 per share and Rs.355 per share, the PE ratio works out to be 22.23 and 20.88. Looking at the industry average PE ratio of 19.98, the Issue price band of Rs.355 to Rs.378 seems pricey.

2. Comparing Price to Book Value (NAV) of the company which is over 2.20 on 31st March, 2014 with its peers also indicates towards higher issue price.

3. Since Present Government is giving major focus on the infrastructure sector, the company may have bright future. But at an asking price of Rs.355 to Rs.378, only retail investors with high risk appetite may consider moderate investment at a lower price band of Rs.355 for long term.

Since the market is in a negative movement now. I’m sure that the investors will be able to get the stock at much lower price after its listing


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