LIKHITA INFRA IPO
(ZEE BUSINESS)
High Risk due to low market cap just 236.7cr - Although Financials
are good but Better to wait for current 1HFY21 results also may depend on
market condition.
Business Takeaway
·
An Oil & Gas pipeline infrastructure service provider in
India, focused on laying pipeline networks along with construction of
associated facilities and providing Operations & Maintenance services to
the City Gas Distribution Companies in India.
·
Company has presence (including past operation) in more than 16
states and 2 Union Territories in India
·
Company has successfully laid over 600 Kms of Oil and Gas
pipelines network in past 5 fiscals
·
Company have executed for the first ever Trans-National
Cross-Country Pipeline of South-East Asia connecting India to Nepal, in the
Year 2019, for supply of petroleum products.
·
Government of India is planning to invest Rs 70,000 crore to
expand the gas pipeline network across the country.
PRO's
·
Company's Financial performance is showing a good picture, Best
part is Revenue from operation grew by 1.9x, while PAT grew by 2.7x and CFO
grew by 4.8x thus growth have come with improvement at all levels.
i.e. Revenue growth is converted into PAT and PAT has been
converted into cash flows.
in Cr FY20
FY19 FY18
RFO 161.2
139.5 87.1 up 1.9x
PAT 19.9
17.9 7.2 up 2.7x
CFO 19.1
3.2 4.0 up 4.8x
FCF 17.6
0.06 -6.3
·
Revenue share from Operation and Maintenance Services( Annual
Maintenance) rose from 7.38% in FY18 to 21.25% which thus helps in earning
visibility and also improving in margin.
·
Borrowings during the same time frame from FY18 to FY20 got
reduced from 13.9cr to just 2.3cr which could be seen by improved FCF also.
·
Company has good order book of 663cr i.e. Book/Bill ratio of 4.1
times with Operating and Maintenance service share is 7% i.e. 47cr.
·
Company's Chairman SivasankaraParameshwaraKurupPillai and
MD SrinivasaRaoGaddipati have descent experience.
·
Company's Cash Conversation Cycle stands just at 31 days.
·
Company's market cap even after the fresh issue stands just at
236.7cr at upper band thus a very small cap company and hence risk is
accordingly present based on market sentiment.
·
Company has only one Book Runner Lead Manager named Unistone who
has handled just 2 IPO's before both where of issue size less than 25cr and
that also in 2018 and both gave listing gains less than 1%
·
Company's business is dependent on a few clients and the loss
of any of major client due to any adverse development could significantly
affect the company.
·
Company's valuation at PE of 8.8 seems fairly prices but in PB
terms company at upper band will trade at 2.51 times although company's RONW is
good at 33%.
·
Company's object of offer is to use money mostly for working
capital requirement (47cr out of 61.1cr)- a small company must be ideally using
the funds for growth, so might be possible that in current financial year
company's liquidity has been deteriorated
·
Management has issued two time bonus shares one in Dec 2019 in
ration of 2.25:1 and 3.5:1 in Feb 2018, so in two years around promoters shares
rose from 1 share to 7.9 shares.
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