Vishnu Prakash R Punglia Limited IPO

About the company:

Vishnu Prakash R Punglia Limited are an ISO 9001:2015 certified integrated engineering, procurement and construction (“EPC”) company with experience in design and construction of various infrastructure projects for the Central and State Government, autonomous bodies, and private bodies across 9 States and 1 Union territory in India. Its principal business operations are broadly divided into four categories: (i) Water Supply Projects (“WSP”); (ii) Railway Projects; (iii) Road Projects and (iv) Irrigation Network Projects. Its major projects include constructing, designing, building, implementing, operating, maintaining and developing Water Supply Projects (“WSPs”) including Water Treatment Plants (“WTPs”) along with pumping stations and laying of pipelines for the supply of water, as well as other projects such as Roads, Bridges, Tunnels, Warehouses, Buildings, Railway Buildings including platforms, stations, quarters, administrative buildings, Rail-Over-Bridges and Waste Water Treatment Plants (“WWTPs”).

Objects of the Offer:

The company intends to utilize the net proceeds from the fresh issue towards the following objects:
- Funding capital expenditure requirements for the purchase of equipment/machinery
- Funding the working capital requirements of the company
- General corporate purposes.

Key Strengths and Opportunities:

- Focused player in Water Supply Projects (WSPs): The company has over 36 years of experience in executing WSPs comprising of construction and development of pipelines, water tanks, reservoirs, tunnels, overhead tanks, water treatment plants and irrigation projects. It has executed more than 75 WSPs till date. Over the years, the company has gained experience in the execution of WSPs and has developed financial strength and managerial capabilities.

- Visible growth through robust order book across segments: The company is focused on undertaking quality projects with potentially higher margins rather than merely increasing its order book. By expanding its order book and skill set across different business segments and geographical regions, the company has been able to pursue a broader range of project tenders and therefore maximize its business volume and profit margins. As on July 15, 2023, it has ongoing projects aggregating ?6,183.58 crores, of which ?2,384.05 crore worth of work has been executed and the rest forms part of its order book. This order book would provide sustainable growth and the ability to enhance shareholders’ value in the future.

- Track record of successfully completed projects: With more than 36 years of experience in the EPC construction industry, the company has developed a reputation for project management and execution on account of its engineering team and labour, in-house integrated model and equipment deployment. These capabilities have enabled the company to complete projects in a successful manner.

- In-house integrated model: The company’s in-house integrated model, helps it to reduce its dependency on third parties for key materials required to execute its projects. It also facilitates timely transportation of these materials to project sites through vehicles owned with GPS tracking devices, reducing pilferage and adulteration. The in-house integrated model ensures that products and services required for the development and construction of a project meet quality standards and are delivered in a timely manner, thereby reducing contractual risks associated with third-party suppliers. This has contributed to its ability to successfully complete projects, without compromising on quality and allowing it to capture a larger proportion of the value chain in the infrastructure development business, including returns and O&M margins.

Risks:

- The company’s projects are typically subject to a completion schedule, as specified under the relevant EPC contracts. It provides its clients with performance guarantees for the completion of the construction of the projects within a stipulated time frame and quality specifications. Failure to adhere to contractually agreed timelines or extended timelines could require the company to pay liquidated damages as stipulated in the EPC contract (ranging from 5% to 10% of the delayed part of the contract value) or lead to partial or complete encashment of the bank guarantee or performance security.

- While the company has a diversified geographical presence, its project portfolio has historically been concentrated in Rajasthan, India. The company started its business operations in Rajasthan and have gradually expanded to Uttar Pradesh, Uttarakhand, Madhya Pradesh, Gujarat, Haryana, Assam, Manipur, Maharashtra and Daman. As of July 15, 2023, the ongoing projects amounting to ? 2,338.18 crore (61.54%) of its pending order book continue to be concentrated in Rajasthan. Any adverse impact in this region may adversely affect the business, results of operations and financial condition of Vishnu Prakash R Punglia Limited.

- A significant portion of the projects executed by the company are in the Water Supply Projects (“WSP”) segment. As of 31st March, 2023, the revenue from WSP segment forms 85% of its total revenue. The Focus on the WSP segment may expose it to risks associated with business concentration and adversely affect its business, financial condition and results of operation.

- Vishnu Prakash’s significant portion of revenues is concentrated from a limited number of clients. The revenue from the top 5 clients forms nearly 81% of the total revenues and from the top 10 clients forms 93% of the total revenues. The loss of any of its significant clients may have an adverse effect on our business, financial condition, results of operations, and prospects.

Financial Snapshot: