SRM Contractors initial public offering (IPO) opens for bidding on the last three sessions of FY24 that is between March 26-28. The company is offering its shares in the range of Rs 200-210 apiece. Interested investors can apply for a minimum of 70 equity shares and its multiples thereafter.
SRM Contractors, established in 2008, is a construction and development company primarily engaged in the construction of roads (including bridges), tunnels, slope stabilization works, and other construction activities in the Union Territories of Jammu & Kashmir (J&K) and Ladakh.
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At the upper end of price band, SRM Contractors is looking to raise a total of Rs 130.20 crore via its initial stake sale, which entirely consists of 62 lakh fresh equity share. SRM Contractors raise Rs 39.06 crore from three anchor investors- Neomile Growth Fund, Saint Capital Fund and Astorne Capital VCC – by allocating them 18,59,900 shares at an issue price of Rs 210 apeice.
Brokerage firms, tracking the issue, are mostly positive on it. They suggest subscribing to the issue on the back of strong hold in the area of operations, rising capital allocation in the region and sound financial track record. However, operational efficiency is seen as a challenge for the company.
In recent years, J&K has received a boost in road infrastructure development. SRM, which operates in J&K and derives 75 per cent of its revenues from road projects, is looking to benefit from this growth in the coming fiscal year as reflected by its past growth in the orderbook. Its orderbook grew 177 per cent between FY21 to FY23 to Rs 1,199.32 crore on January 31, 2024, said SMIFS.
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“We recommend a subscribe to the issue as the company’s order book is expected to increase in FY24 and FY25 due to the government infrastructure initiatives in J&K where the company operates and the company is increasing its fleet machinery and equipment which will drive its operational efficiency in the coming quarters,” SMIFS added.
The net proceeds from the issue shall be utilized towards funding capital expenditure requirements for the purchase of equipment/machinery; repayment and/or prepayment of certain outstanding secured borrowings availed by the company; funding the working capital requirements, investment in project specific joint venture projects; and general corporate purposes.
“The company also has a track record of successfully completing large-scale government projects. During recent years, various factors such as rapid urbanization, rapid freight movement, and demand for improved infrastructure have been pushing tunnel construction and development throughout the country, said Parth Shah, Research Analyst at StoxBox.
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“SRM Contractors has gained the experience and has developed technical capabilities to execute projects in challenging terrain. Therefore, looking at the future scenarios, we remain positive on the Indian infrastructure story and believe that it will emerge as one of the reliable partners in nation-building,” Shah added with a ‘subscribe for a long-term’ rating for the IPO.
SRM Contractors operates as an EPC contractor and on a unit-price basis for infrastructure projects and subcontracts infrastructure construction projects. It has completed 37 infrastructure construction projects with a total contract value of Rs 770.88 crore including 31 road construction projects, 3 tunnel projects, 1 slope stabilization project, and 2 other construction works.
SRM Contractors reported a net profit of Rs 21.07 crore with a revenue of Rs 242.28 crore for the nine-months ended on December 31, 2023. The company clocked a bottomline of Rs 18.75 crore with a revenue of Rs 300.65 crore for the fiscal year ended on March 31, 2023.
SRM Contractors has reserved 50 per cent of the net offer for qualified institutional investors (QIBs), while non-institutional investors (NIIs) will have 15 per cent of shares reserved for them. Retail investors will have 35 per cent of the net issue reserved for them.
Interactive Financial Services is the book running lead manager of the SRM Contractors IPO, while Bigshare Services is the registrar for the issue. The company is likely to be listed on both BSE and NSE with Wednesday, April 3 as the tentative date of listing on the bourses.
