IPO Centre - New Issue Monitor
North-India focused road construction player
Ceigall India
Ceigall India is an infrastructure engineering, procurement and construction (EPC) company undertaking specialized structural works such as elevated roads, flyovers, bridges, railway over bridges, tunnels, highways, expressways and runways. The principal business operations are broadly divided into EPC projects and hybrid annuity model (HAM) projects. These are spread over 10 states in India. The company takes up independent operation and maintenance (O&M) projects in addition to undertaking O&M activities in accordance with its contractual obligations under the EPC and HAM concession agreements. It executes sub-contracting projects. EPC accounted for 66.05%, HAM 26.34%, and O&M 0.32% of the total revenue in FY 2024.
Ceigall India on 26 July 2024 has completed over 34 projects, including 16 EPC, one HAM, five O&M, and 12 item-rate projects, in the roads and highways sector. Currently, it has 18 ongoing projects, including 13 EPC projects and five HAM projects. Theseinclude elevated corridors, bridges, flyovers, rail over-bridges, tunnels, expressway, runway, metro projects, and multi-lane highways.
The order book stood at Rs 9470.842 crore as on June 30, 2024. Of the current order book, 80.31% of the projects were awarded by NHAI and the remaining 19.69% comprised contracts from other central, state governmental and local departments.Major public sector clients include NHAI, Indian Railway Construction International Limited (IRCON), Military Engineer Services (MES), and Bihar State Road Development Corporation Limited (BSRDCL).
Incorporated in July 2002, Ceigall India gradually increased its execution capabilities in terms of size of the projects. As on July 26, 2024,the date of the Red Herring Prospectus, the company waseligible to bid for single NHAI EPC projects up to a value of Rs 5700 crore and single NHAI HAM projects up to a value of Rs 5500 crore. Similarly, it is empaneled to participate with the Delhi Metro Rail Corporation Limited for upcoming tenders involving, inter alia, construction of railways, mega bridges and tunnels in India and abroad and with a public sector undertaking to undertake highways, bridges and tunnel construction work in the north-eastern states of India. The empanelment is mutually extendable.
Ceigall India has experience of executing projects across diverse geographic locations in India, with varying degrees of complexities, such as construction in high-traffic and high-density areas, construction of tunnels in hilly terrain and slope protection and rock fall protection due to high rainfall and involving specialised structures such as tunnels, bridges and elevated roads.
Operations started in Punjab and gradually expanded to road and highway projects in other states in India. Currently, it has diversified its geographical presence in construction and development and execution of major multi-lane highway projects, putting up specialized structures in various states of India, including Punjab, Haryana, Rajasthan, Uttar Pradesh, Himachal Pradesh, Jammu and Kashmir, Jharkhand, Delhi, Maharashtra and Bihar. The projects were spread across six states in FY 2023 and expanded to 10 states by FY 2024.
The Issue
The IPO comprises offer for sale (OFS) of 14174840 equity shares and fresh issue of equity shares, aggregating to Rs 684.252 crore. Of the OFS of 14174840 equity shares, sales by the promoter shareholders constitute 14173190 equity shares (about 4248300 by Ramneek Sehgal, 7536050 by Ramneek Sehgal & Sons HUF, 4950 by Avneet Luthra, 919960 by Mohinder Pal Singh Sehgal, 548980 by Parmjit Sehgal and 9144950 by Simran Sehgal) and 1650 equity shares by an individual selling shareholder.
Object of the Issue
Of the net proceeds from the fresh issue, about Rs 99.789 crore will be used to fund purchase of equipment, Rs 413.40 crore towards repayment and pre-payment of certain borrowings in part or full availed by the company or subsidiary, and balance towards general corporate purposes.
The total borrowing stood at Rs 1811.018 crore end of March 2024.
Strengths
Successful track record in executing projects across diverse geographic locations in India, with varying degrees of complexities, such as construction in high-traffic and high-density areas, and construction of specialized structures such as tunnels in hilly terrain
The order backlog stood strong at Rs 9470.84 crore as of June 30, 2024. This is 3.13 times the FY2024 revenue.
Strong investment pipeline in infrastructure projects in the country especially roads/highways/metros etc.
Weakness
The business growth relies on contracts awarded through tenders under the competitive bidding process and the ability to qualify, independently and jointly with other partners, availability of enough projects in the tender pipeline, timely award of the contract as well as ability to win themthrough competitive bids. The bid success ratio was 16-17% in the last three fiscals.
Typically, EPC projects are exposed to various implementation and other risks, including risks of time and cost overruns, delay in acquisition, and availability of RoW by customer, and uncertainties. These may adversely affect the business, financial condition, results of operations, and prospects.
Projects sub-contracted or undertaken through a joint venture (JV) may be delayed on account of nonperformance of the JV partner, principal or sub-contractor.
About 50% of revenue came from Punjab and 23% and 33% from Uttar Pradesh in FY2024 and FY2023. This displaysa significant geographical concentration.
Reported negative cash flow from operation in FY2022, FY2023 and FY2024.
One of the directors, Arun Goyal, was debarred from accessing the securities market in the past. There have been instances in the past where certain regulatory filings were not made with the RoC. There hasbeen non-compliance with certain requirements under the Companies Act, 2013. A penalty of Rs 1.28 million has been paid.
Operates in a very competitive industry.
Valuation
Consolidated re-stated revenue stood higher by 46% to Rs 3029.35 crore in FY 2024. With the OPM expanding by 280 bps to 17.1%, OP jumped 75% to Rs 517.66 crore. Eventually, Patafter MI grew83% to Rs 306.14 crore.
The EPS for FY2024 on expanded equity at the upper price band is Rs 17.6. The P/E on the upper price band works out to 22.8 times.
EPC companies in the space of roads, such as KNR Construction quoting at a PE of 14.8 times, HG Infraat 19.9 times, J Kumar Infra19.3 times, GR Infra12.7 times, Ashoka Buildcon 14.3 times, ITD Cementation 32.9 times, PNC Infratech 14.4 times, RPP Infra 31.1 times, and GPT Infra 33.8 times.
| Ceigall India : Issue Highlights |
|
| Fresh Issue (Rs crore) | 684 |
| Offer for sale (in equity share nos.) | 14174840 |
| Price band (Rs.) ** |
|
| Upper | 401 |
| Lower | 380 |
| Post-issue equity (Rs crore) | |
| in Upper price band | 87.10 |
| in Lower Price Band | 87.57 |
| Post-issue promoter (including promoter group) stake (%) | 82.06 |
| Minimum Bid (in nos.) | 37 |
| Issue Open Date | 01-08-2024 |
| Issue Close Date | 05-08-2024 |
| Listing | BSE, NSE |
| Rating | 45 /100 |
| Ceigall India : Re-stated Consolidated Financials |
|
|
| ||
|
| 2203 (12) | 2303 (12) | 2403 (12) | ||
| Sales | 1133.79 | 2068.17 | 3029.35 | ||
| OPM (%) | 16.4 | 14.3 | 17.1 | ||
| OP | 185.92 | 295.63 | 517.66 | ||
| Other income | 12.72 | 18.87 | 36.84 | ||
| PBIDT | 198.63 | 314.50 | 554.50 | ||
| Interest | 10.55 | 51.71 | 94.15 | ||
| PBDT | 188.08 | 262.79 | 460.34 | ||
| Depreciation | 18.61 | 37.60 | 54.99 | ||
| PBT | 169.47 | 225.19 | 405.35 | ||
| EO Exp | 0.00 | 0.00 | 0.00 | ||
| PBT after EO | 169.47 | 225.19 | 405.35 | ||
| Tax | 43.61 | 57.92 | 101.05 | ||
| PAT from Continuing Biz | 125.86 | 167.27 | 304.31 | ||
| Share of Profit from Associates | 0.00 | 0.00 | 0.00 | ||
| PAT from Continuing Biz | 125.86 | 167.27 | 304.31 | ||
| Minority Interest | 0.00 | 0.00 | -1.84 | ||
| Net profit | 125.86 | 167.27 | 306.14 | ||
| EPS (Rs)* | 7.2 | 9.6 | 17.6 | ||
| * on post IPO fully dilluted equity (on upper price band) of Rs 87.10 crore. Face Value: Rs 5 | |||||
| EPS is calculated after excluding EO and relevant tax | |||||
| Figures in Rs crore | |||||
| Source: Capitaline Corporate database | |||||
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