What you must know about Manglam Infra and Engineering IPO: Price Band ₹53 to ₹56 per share

About Manglam Infra and Engineering Ltd

Manglam Infra and Engineering Ltd was incorporated in the year 2010 as an independent organization of designers, architects, planners, engineers, environmental specialists, and technical specialists. Manglam Infra and Engineering Ltd offers a broad range of infrastructure and engineering consultancy services. Apart from the private sector, the company also works very closely with the various government and the government departments. Manglam Infra and Engineering Ltd undertakes consultancy assignments in various disciplines of engineering. This includes design, EPC, and integrated project management services for highways, roads, bridges, tunnels, buildings etc. The company now has its footprint as an engineering consultant across India. 

The company also works in the areas of public health engineering, rural and urban infrastructure; including water resources and solid waste management. The company operates through its team of over 300 professionals, across various verticals. Some of the marquee clients of Manglam Infra and Engineering Ltd include National Highways Authority of India (NHAI), NHIDCL, Public Works Department, Madhya Pradesh Industrial Development Corporation (MPIDC), Border Roads Organization, Madhya Pradesh Rural Roads Development Authority, Madhya Pradesh Jal Nigam, Bihar Rajya Pul Nirmal Nigam, MP Warehousing & Logistics Corporation, Ministry of Road Transport & Highways, MSRDC, Government of Jharkhand, Maharashtra PWD, Bihar Rural Road Development Authority etc.

Highlights of the Manglam Infra and Engineering IPO

Here are some of the highlights of the Manglam Infra and Engineering IPO on the SME segment of the National Stock Exchange (NSE). 

•    The issue opens for subscription on 24th July 2024 and closes for subscription on 26th July 2024; both days inclusive.

•    The stock of Manglam Infra and Engineering IPO 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 ₹53 to ₹56 per share. The final price discovery will happen in the above price band only.

•    The IPO 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, the company will issue a total of 49,32,000 shares (49.32 lakh shares), which at the upper band IPO price of ₹56 per share aggregates to fresh fund raising of ₹27.62 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 49,32,000 shares (49.32 lakh shares) which at the upper band IPO price of ₹56 per share aggregates to overall IPO size of ₹27.62 crore.

•    Like every SME IPO, this issue also has a market making portion. The company has set aside a total of 5,24,000 shares as quota for market inventory. Giriraj Stock Broking 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 Yogendra Kumar Singh, Ajay Verma, Nisha Singh, and Seema Verma. The promoter holding in the company currently stands at 100.00%. Post the fresh issue of shares, promoter equity holding share will get diluted to 71.97%.

•    The fresh issue funds will be used by the company for funding working capital needs of the business, in a business that is generally quite working capital intensive. A small part of the IPO proceeds has also be set aside for general corporate purposes.

•    Unistone Capital Private Ltd will be the lead manager to the issue, and Bigshare Service Private Ltd will be the registrar to the issue. The market maker for the issue is Giriraj Stock Broking Private Ltd. The IPO of Manglam Infra and Engineering Ltd will be listed on the SME IPO segment of the NSE.
 

Key Dates for Manglam Infra and Engineering IPO and Application Details

Here are the key dates about the IPO.

Data Source: Company RHP

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 30th 2024, will be visible to investors under the ISIN Code – (INE0R3101011). This credit 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.

Manglam Infra and Engineering IPO: Lot Sizes for Investment

Manglam Infra and Engineering Ltd has announced a market maker allocation of 5,24,000 shares, which will be used as inventory for market making. Giriraj Stock Broking Private Ltd will be the market maker for the IPO. The net offer (net of market maker allocation) will be divided between the QIB Investors, Retail Investors and the HNI / NII Investors. The breakdown of the overall IPO of Manglam Infra and Engineering Ltd in terms of allocation to various categories are captured below.

Data Source: Company RHP

The minimum lot size for the IPO investment will be 2,000 shares. Thus, retail investors can invest a minimum of ₹1,12,000 (2,000 x ₹56 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 ₹2,24,000. 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 Manglam Infra and Engineering Ltd.

Financial Highlights of Manglam Infra and Engineering Ltd

The table below captures the key financials of Manglam Infra and Engineering Ltd for the last 3 completed financial years. 

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 grown at a healthy clip, with FY24 revenues about 55.9% higher than the revenues of FY22. However, the net margins of the company are extremely attractive at 16.81% and have been stable at these levels over the last 3 years.

•    While net margins of the company have been relatively robust at 16.81%, the other return margins have shown strong traction in the latest year. The return on equity (ROE) stands robust at 39.55% in FY24, while the return on assets (ROA) is also very robust at 20.38% in FY24. However, both these numbers are lower than the previous year.

•    The asset turnover ratio or the sweating ratio has been healthy in the latest year at 1.21X and that only gets further accentuated when you look at the healthy levels of the ROA. However, in this largely service based business, it is the net margins and the growth in the top line and the bottom line that really matters for long term valuations.

The company has latest year EPS of ₹5.34, after adjusting for capital actions. The FY24 earnings are being discounted by the IPO price of ₹56 per share at 10-11 times P/E ratio. That is not too expensive if you factor in the robust levels of the ROE, and the return on assets in the latest year. Also, if this growth continues into FY25, then justifying the valuations should be a lot simpler, hopefully with improved net margins.

To be fair, Manglam Infra and Engineering Ltd does bring some intangible advantages to the table. It offers presence in diverse projects with a proven track record across various services. It also has a high quality manpower that can be the trigger for value accretion. This business model is also relatively asset-light. Its network partnership is extensive and should be a great support in the coming quarters. Investors must look at the IPO from a longer term perspective with a holding period of 1-2 years. Like more pure manpower based businesses, this also does carry higher risk implicit in such IPO stocks. We have seen in many of the people-based businesses that valuations can be quite volatile. For now, the company has the moat to fend off competition, and investors can take a risk of a long term play.