What you must know about VVIP Infratech IPO: Price Band ₹91 to ₹93 per share

About VVIP Infratech Ltd

VVIP Infratech Ltd was incorporated in the year 2001, and it is a “Class-A” civil and electrical contractor. The company specializes in focused infrastructure projects like sewer treatment plants, water facilities, roads, and electrification. VVIP Infratech Ltd primarily serves the regions like Uttar Pradesh, Uttarakhand, NCT of Delhi, and the rest of northern India. The company has gradually cemented its position as a preferred choice in sewer treatment projects. Over the years, VVIP Infratech Ltd has successfully delivered numerous key infrastructure projects, with minimal time and cost overruns. Its areas of expertise include sewer treatment, Jal Jeevan Mission projects, transmission & distribution in power sector, and civil construction. Some of the major clients of VVIP Infratech Ltd include Ghaziabad Development Authority, Uttarakhand Power Corporation, Lucknow Development Authority, Lucknow Nagar Nigam, Kanpur Development Authority, Uttar Pradesh Power Corporation, Uttaranchal Payjal Nigam, etc. The company employs about 466 personnel on its rolls.

Highlights of the VVIP Infratech IPO

Here are some of the highlights of the VVIP Infratech IPO on the SME segment of the Bombay Stock Exchange (BSE). 

•    The issue opens for subscription on 23rd July 2024 and closes for subscription on 25th July 2024; both days inclusive.

•    The stock of VVIP Infratech IPO has a face value of ₹10 per share and it is a book building issue. The price band for the book building issue is set in the range of ₹91 to ₹93 per share. The final price will be discovered in this price band only.

•    VVIP Infratech IPO has only a fresh issue component and no offer for sale (OFS) component in the public issue. While the fresh issue portion is EPS dilutive and equity dilutive, OFS is just a transfer of ownership and  hence it is neither EPS dilutive nor is it equity dilutive.

•    As part of the fresh issue portion of the IPO, VVIP Infratech Ltd will issue a total of 65,82,000 shares (65.82 lakh shares), which at the upper band IPO price of ₹93 per share aggregates to fresh fund raising of ₹61.21 crore.

•    Since there is no offer for sale, the fresh issue of shares will also double up as the total issue size. As a result, the overall IPO size will also comprise of the issue of a total of 65,82,000 shares (65.82 lakh shares) which at the upper band of the IPO price at ₹93 per share will aggregate to overall IPO size of ₹61.21 crore.

•    Like every SME IPO, this issue also has a market making portion with a market maker inventory allocation of 3,38,400 shares. Share India Securities Ltd will be the market maker to the issue. The market maker provides two-way quotes to ensure liquidity on the counter and low basis costs, post listing.

•    The company has been promoted by Praveen Tyagi, Vaibhav Tyagi, and, Vibhor Tyagi. The promoter holding in the company currently stands at 92.34%. Post the fresh issue of shares in the IPO, the promoter equity holding share will get diluted to 68.00%.

•    The fresh issue funds will be used by the company towards proposed capital expenditure and also for meeting some of its working capital needs. Part of the funds will also be used for general corporate purposes. 

•    Share India Capital Services Private Ltd will be the lead manager to the issue, and Maashitla Securities Private Ltd will be the registrar to the issue. The market maker for the issue is Share India Securities Ltd.
The IPO of VVIP Infratech Ltd will be listed on the SME IPO segment of the BSE.
 

Key Dates for VVIP Infratech IPO and Application Details

Here are the key dates about the IPO.

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 29th 2024, will be visible to investors under the ISIN Code – (INE0MNP01016). 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.

IPO Allocation and Minimum Investment Lot Size

VVIP Infratech Ltd has already announced the market maker allocation at 3,38,400 shares as inventory for market making. Share India Securities Ltd will be the market maker for the IPO. The breakdown of the overall IPO of VVIP Infratech Ltd in terms of allocation to various categories are captured in the table below.

The minimum lot size for the IPO investment will be 1,200 shares. Thus, retail investors can invest a minimum of ₹1,11,600 (1,200 x ₹93 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 2,400 shares and having a minimum lot value of ₹2,23,200. 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 is no maximum size limit for HNI applicants in an SME IPO. Let us now turn to the financial highlights of the IPO of VVIP Infratech Ltd. The company has reported numbers up to the close of fiscal year FY24 (Year ended March 2024); which is the latest data that is available for our financial analysis.

Financial Highlights: VVIP Infratech Ltd

The table below captures the key financials of VVIP Infratech Ltd for the last 3 completed financial years. 

Data Source: Company RHP filed with SEBI

The sales growth in the last 3 years has been steady and growing almost at an even pace. The FY24 sales are nearly 55.9% higher than the FY22 sales. However, the company numbers are not comparable with the previous year in terms of the profitability ratios and hence for the analysis we shall stick to only the latest year data. This not only applies to the net margins to the other profitability ratios like the return on equity (ROE) and the return on assets (ROA). In this case, the previous data may not add too much value to the company.

The company has latest year EPS of ₹17.24 on a standalone basis and we have not included the weighted  average EPS, since the growth has been steady in the last few years. The latest year earnings are being discounted by the IPO price of ₹93 per share at 5-6 times P/E ratio, which is fairly reasonable if you consider the steady growth and the margins of the company. We can only extrapolate for FY25 after some reasonable amount of data flows in for the FY25 quarters. As of now, the FY24 data is the most recent data available.

The company also comes to the table with some qualitative advantages. Its order book is robust and that should ensure a steady pipeline for future growth in sales and profits. The company has a history of time delivery with minimal and cost overruns. Investors with a risk appetite can look to participate in the IPO, but they may have a longer wait as valuations will depend on quarterly earnings traction. The pricing at the current juncture looks to be very reasonable, especially if you look at the FY24 numbers for the sake of valuations. Investors can look at the IPO from a longer term perspective.