What you must know about Ganesh Green Bharat IPO?

About Ganesh Green Bharat Ltd

Ganesh Green Bharat Ltd was incorporated in the year 2016 to engage in the business of electrical contracting servicing. This includes a gamut of services like the supply, installation, testing, and commissioning (SITC) of solar and electrical goods and services to various government bodies. Till date, Ganesh Green Bharat Ltd has completed projects under a number of government schemes like the Saubhagya Scheme, KUSUM Scheme etc. As of date, the current order book includes about 10 work orders for solar systems and allied services, around 7 work orders for electrical contracting and one water supply project. The company employs a multi-faceted team of engineers and third-party consultants; apart fro0m domain experts in the industry. Some of its marquee clients include the Gujarat Industrial Development Corporation, Ahmedabad Municipal Corporation (AMC), Rajasthan Renewable Energy Corporation Limited (RRECL) etc. It has about 40 employees on its rolls.

Highlights of the Ganesh Green Bharat IPO

Here are some of the highlights of the Ganesh Green Bharat IPO on the SME segment of the National Stock Exchange (NSE). 

•    The issue opens for subscription on 05th July 2024 and closes for subscription on 09th July 2024; both days inclusive.

•    The stock of the company has a face value of ₹10 per share and it is a book built issue. The book building price band for the IPO has been set in the range of ₹181 to ₹190 per share. The final price discovery will happen in the above price band only.

•    The IPO of Ganesh Green Bharat Ltd has only a fresh issue component and no offer for sale (OFS) portion. While the fresh issue portion is EPS dilutive and equity dilutive, the OFS is just a transfer of ownership and  hence is not EPS or equity dilutive.

•    As part of the fresh issue portion of the IPO, Ganesh Green Bharat Ltd will issue a total of 65,91,000 shares (65.91 lakh shares), which at the upper band IPO price of ₹190 per share aggregates to fresh fund raising of ₹125.23 crore.

•    Since there is no offer for sale, the fresh issue will also double up as the overall size of the IPO. Therefore, the overall IPO size will also comprise of the issue of 65,91,000 shares (65.91 lakh shares) which at the upper band IPO price of ₹190 per share aggregates to overall IPO size of ₹125.23 crore.

•    Like every SME IPO, this issue also has a market making portion. The company has set aside a total of 3,31,200 shares as quota for market inventory. Hem Finlease Private Ltd has already been appointed as the market makers to the issue. The market maker provides two-way quotes to ensure liquidity on the counter and low basis costs.

•    The company has been promoted by Ketan Bhai Narsinhbhai Patel, Rajendrakumar Narsinhbhai Patel, Nirav Kumar Suresh Bhai Patel, and Shilpaben Ketan Bhai Patel. The promoter holding in the company currently stands at 100.00%. However, post the fresh issue of shares, promoter equity holding share will get diluted to 73.42%.

•    The fresh issue funds will be used by the company for repayment of debt and for capex towards installation of additional plant and machinery in the factory. A small part of the IPO proceeds has also be set aside for working capital needs. 

•    Hem Securities Ltd will be the lead manager to the issue, and KFIN Technologies Ltd will be the registrar to the issue. The market maker for the issue is Hem Finlease Private Ltd.

The IPO of Ganesh Green Bharat Ltd will be listed on the SME IPO segment of the NSE.
 

Ganesh Green Bharat IPO – Key Dates

The SME IPO of Ganesh Green Bharat Ltd IPO opens on Friday, 05th July 2024 and closes on Tuesday, 09th July 2024. The Ganesh Green Bharat Ltd IPO bid date is from 05th July 2024 at 10.00 AM to 09th July 2024 at 5.00 PM. The Cut-off time for UPI Mandate confirmation is 7.00 PM on the issue closing day; which is 09th July 2024.

Data Source: Company RHP

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. The credit of shares to the demat account on July 11th 2024, will be visible to investors under the ISIN Code – (INE0R8C01018). This allocation to the demat account is only applicable to the extent of the allocation of shares and if no allocations are made in the IPO, then no credit would be visible in the demat account.

IPO Allocation and Minimum Investment Lot Size

Ganesh Green Bharat Ltd has announced a market maker allocation of 3,31,200 shares, which will be used as inventory for market making. Hem Finlease Private Ltd will be the market maker for the IPO. The net offer (net of market maker allocation) will be divided between the retail investors and the HNI / NII investors. The breakdown of the overall IPO of Ganesh Green Bharat Ltd in terms of allocation to various categories are captured below.

Data Source: Company RHP filed with SEBI

The minimum lot size for the IPO investment will be 600 shares. Thus, retail investors can invest a minimum of ₹1,14,000 (600 x ₹190 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 1,200 shares and having a minimum lot value of ₹2,28,000. 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.

There are no upper limits for investments by HNIs / NIIs in the IPO of Ganesh Green Bharat Ltd.

Financial Highlights: Ganesh Green Bharat Ltd

The table below captures the key financials of Ganesh Green Bharat Ltd for the last 3 completed financial years. 

Data Source: Company RHP filed with SEBI

Here are some of the key takeaways from the financials of the company for the last 3 years; i.e., from FY22 to FY24, being the latest year. 

•    The revenues over the last 3 years have growth at a healthy clip, with FY24 revenues about 61.2% above the revenues of FY22, despite a fall in sales in FY23. As net profit traction has picked up over the last two years, the net margins have also improved sharply to 11.69% in the latest year.

•    While net margins of the company have been relatively strong at 11.69%, the other return margins have also shown growth traction in latest year. The return on equity (ROE) stands robust at 33.8% in FY24, while the return on assets (ROA) is also strong at 13.23% in FY24. Both are up sharply from the previous years.

•    The asset turnover ratio or the sweating ratio has been healthy in the latest year at 1.13X and that only gets further accentuated when you look at the healthy levels of the ROA. It remains to be seen how the additional capital base is handled by sales growth.

The company has latest year EPS of ₹10.92, after adjusting for capital actions. The FY24 earnings are being discounted by the IPO price of ₹190 per share at 17-18 times P/E ratio. That is not too expensive if you factor in the robust growth in the ROE, net margins, and the return on assets. Also, if this growth continues into FY25, then justifying the valuations should not be too difficult. 

To be fair, Ganesh Green Bharat Ltd some bring some intangible advantages to the table. It has established relationships and strategic partnerships to provide high quality solutions to its customers. Solar energy is a high growth area so ancillary services will also grow in tandem. The high growth green energy tailwinds are likely to be a booster for the stock. The investors can look at the IPO from a longer term perspective with a holding period of 1-2 years. Ideally, investors must be prepared for the higher risk implicit in such IPO stocks; but the business model does look promising. For now, the company has the moat to play out competition in the industry, that is already growing at a rapid pace.