What you must know about Indifra IPO?

Indifra Ltd was incorporated in the year 2009 and the company provides infrastructure management and contracting services, gas pipeline laying and electrical equipment distribution services. The company currently operates two business verticals. These verticals pertain to pipeline & infrastructure management contracting services and the distribution of electrical appliances. Its direct customers are the gas supply companies and it provides them with the management of their gas supply pipelines  and related infrastructure. Among others, the company has also worked closely with Adani Gas Limited. On the electrical products distribution business, Indifra Ltd offers voltage stabilizers, induction cooktops, inverters, batteries, ceiling fans, domestic switch gears, air coolers, water heaters, modular switches, solar water heaters, energy-saving fans, and a lot more. The company is quite small in the scale of its operations and employs just about 11 persons on its rolls.

Key terms of the SME IPO of Indifra Ltd

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

• The issue opens for subscription on 21st December 2023 and closes for subscription on 26th December 2023; both days inclusive.
   
• The company has a face value of ₹10 per share and it is a fixed price issue. The issue price band for the IPO has been fixed at ₹65 per share. Being a fixed price issue, there is no question of price discovery in this case.
   
• The IPO of Indifra 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, Indifra Ltd will issue a total of 21,60,000 shares (21.60 lakh shares), which at the fixed IPO price of ₹65 per share aggregates to a fresh fund raising of ₹14.04 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 21,60,000 shares (21.60 lakh shares) which at the fixed IPO price of ₹65 per share will aggregate to overall IPO size of ₹14.04 crore.
   
• Like every SME IPO, this issue also has a market making portion with a market maker inventory allocation of 1,08,000 shares. The market maker for the issue is Spread X Securities Private Ltd and they will provide two-way quotes to ensure liquidity and low basis costs on the counter post listing.
   
• The company has been promoted by Abhishek Sandeepkumar Agrawal and Sandeepkumar Vishwanath Agrawal HUF. The promoter holding in the company currently stands at 96.00%. However, post the fresh issue of shares in the IPO, the promoter equity holding share will get diluted to 67.55%.
   
• The fresh issue funds will be used by the company for meeting its working cap funding needs. Part of the monies raised will also go towards meeting the general corporate expenses of the company.
   
• Beeline Capital Advisors Private 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 Spread X Securities Private Ltd.

IPO allocation and minimum lot size for investment

Indifra IPO has allocated 5.02% of the issue size for the market makers to the issue, Arham Shares Private Ltd. The net offer (net of market maker allocation) will be divided equally between the retail investors and the HNI / NII investors. The breakdown of the overall IPO of Indifra Ltd in terms of the allocation to various categories are captured in the table below.

The minimum lot size for the IPO investment will be 2,000 shares. Thus, retail investors can invest a minimum of ₹130,000 (2,000 x ₹65 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 4,000 shares and having a minimum lot value of ₹260,000. 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 Indifra IPO (SME)

Indifra IPO opens on Thursday, December 21st, 2023 and closes on Tuesday, December 26th, 2023. The Indifra Ltd IPO bid date is from December 21st, 2023 10.00 AM to December 26th, 2023 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is December 26th, 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. The credit of shares to the demat account on December 28th 2023, will be visible to investors under the ISIN Code – (INE0PS301014).

Financial highlights of Indifra Ltd

The table captures the key financials of Indifra 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 revenue growth has been flat in the latest year, but has grown sharply in the previous year. However, net profits have grown in the latest year too with a sharp improvement in the net margins.
   
• The asset turnover ratio or the asset sweating ratio has been well above 3, which is impressive. On top of that, the positive ROA trend is also icing on the cake. It promises rapid growth in ROE in the coming quarters.

The company has latest year EPS of ₹5.79 discounts the IPO price at a P/E ratio of 11.23 times, which looks reasonable. However, a lot will depend on the company being able to sustain the growth rate and the net margins and ROE at healthy levels. This is a stock that investors must view as a high risk proposition with a longer term holding.