What you must know about Akanksha Power and Infrastructure IPO?

Akanksha Power and Infrastructure Ltd was incorporated in 2008 to provide sustainable power solutions. The company manufactures electrical panels, instrument transformers, and vacuum contactors, for use by power transmission and distribution utilities. The company has also recently entered into the business of turnkey construction of High Tension (HT) and Low Tension (LT) electrical infrastructure including 33/11 KV Substations and Distribution Substations, etc. Its Vacuum Contactors are designed to operate reliably even in harsh environments. Akanksha Power and Infrastructure Ltd has 2 manufacturing units located situated in Nashik, Maharashtra. It caters to the traditional thermal power sector and also sprucing up to cater to the fast emerging alternative power or the renewable power segment too.

Key terms of the Akanksha Power and Infrastructure IPO (SME)

Here are some of the highlights of the Akanksha Power and Infrastructure IPO on the SME segment of the National Stock Exchange (NSE).

•    The issue opens for subscription on 27th December 2023 and closes for subscription on 29th December 2023; both days inclusive.

•    The company has a face value of ₹10 per share and it is a book building issue. The issue price band for the IPO has been fixed in the range of ₹52 to ₹55 per share. Being a book built issue, the final price will be discovered in the above band, through book building.

•    The IPO of Akanksha Power and Infrastructure Ltd has only a fresh issue component and no offer for sale (OFS) portion. It must be remembered that the fresh issue portion is EPS dilutive and equity dilutive, but OFS is just a transfer of ownership and  hence it is not EPS or equity dilutive.

•    As part of the fresh portion of the IPO, Akanksha Power and Infrastructure Ltd will issue a total of 49,98,000 shares (49.98 lakh shares), which at the upper band IPO price of ₹55 per share aggregates to a fresh fund raising of ₹27.49 crore.

•    Since there is no offer for sale (OFS) portion, the fresh issue size will also double up as the overall IPO size. Therefore, the total IPO size will also comprise of the issue of 49,98,000 shares (49.98 lakh shares) which at the upper IPO band price of ₹55 per share will aggregate to overall IPO size of ₹27.49 crore.

•    Like every SME IPO, this issue also has a market making portion with a market maker inventory allocation of 2,60,000 shares. The joint market makers for the issue are Nikunj Stock Brokers Ltd and SS Corporate Services Ltd and they will provide two-way quotes to ensure liquidity and low basis costs post listing.

•    The company has been promoted by Bipin Bihari Das Mohapatra and Chaitali Bipin Das Mohapatra. The promoter holding in the company currently stands at 83.28. However, post the fresh issue of shares in the IPO, the promoter equity holding share will get diluted to 60.81%.

•    The fresh issue funds will be used by the company for meeting its capex and for funding working capital gaps. Part of the monies raised will also go towards meeting the general corporate expenses of the company.

•    Narnolia Financial Services  Ltd will be the lead manager to the issue, and Link Intime India Private Ltd will be the registrar to the issue. The joint market makers for the issue are Nikunj Stock Brokers Ltd and SS Corporate Services Ltd.

IPO allocation and minimum lot size for investment

Out of the total shares on offer, the company has allocated 2,52,000 shares for the market maker for providing liquidity post listing and reducing basis risk. The net offer (net of market maker allocation) will be distributed between the QIBs, retail investors and the HNI / NII investors. The table below captures the gist of the IPO allocation to various categories.

Data Source: RHP filed with SEBI

The minimum lot size for the IPO investment will be 3,000 shares. Thus, retail investors can invest a minimum of ₹135,000 (3,000 x ₹45 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO. HNI / NII investors can invest a minimum of 2 lots comprising of 6,000 shares and having a minimum lot value of ₹270,000. There is no upper limit on what the QIBs as well as what the HNI / NII investors can apply for. The table below captures the break-up of lot sizes for different categories.

Key dates to be aware of in the Akanksha Power and Infrastructure IPO (SME)

The SME IPO of Akanksha Power and Infrastructure Ltd IPO opens on Wednesday, December 27th, 2023 and closes on Friday, December 29th, 2023. The Akanksha Power and Infrastructure Ltd IPO bid date is from December 27th, 2023 10.00 AM to December 29th, 2023 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is December 29th, 2023.

It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (applications supported by blocked amounts) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account.

Financial highlights of Akanksha Power and Infrastructure Ltd

The table below captures the key financials of Akanksha Power and Infrastructure Ltd for the last 3 completed financial years.

Data Source: Company DRHP filed with SEBI

Here are some of the key takeaways from the financials of the company for the last 3 years.

• The revenues have been consistently lower in the last two years and the profits of the company have also shown an erratic trend in the last 3 years. This is likely to come in the way of assigning a valuation based on future cash flows.
   
• The net margins have been in the range of 5-6% in the latest year. However, here again, the comparisons are tough since the company had seen a sharp profit variations over the years. However, ROE stays robust at above 18%, as does the ROA over 6%.
   
• Being a capital heavy business, the asset turnover ratio or the asset sweating ratio has been below 1 in the latest year. This may not be too representative as profits have been too volatile in recent years.

The company has latest year EPS of ₹2.29 and weighted average EPS of ₹2.43 for the last 3 years. On the latest year EPS, the P/E ratio works out to the range of 22X to 24X times. This is fairly high for the kind of industry that the company operates in as its products are not the typical FMEG products but they are more of the products supplied directly to other manufacturers. Here margins tend to be relatively lower and the competition from the organized sector is also relatively high. Investors should be wary of the valuations of the company and it has tough to take a call when sales have been persistently falling over the last few years. Investors in the IPO must be conscious of the higher level of risk involved in the stock and position their trade accordingly.