Giriraj Civil Developers Ltd

Started in 2005, Giriraj Civil Developers Ltd is a Mumbai based civil works contracting and engineering company. Company's current concentration is on the Railway sector projects, where it undertakes a wide scope of work which includes construction of foot over bridges, platform extensions; sick line sheds, stabling lines etc. Company also works into other infrastructural projects for government / semi-government bodies like MCGM and MRVC and for various private players. Most of its projects undertaken are in the states of Maharashtra and Gujarat. Company has successfully completed several projects since inception in 2005 and currently has 21 ongoing projects. Company's revenue model includes projects undertaken as direct Contract from various government, semi-government and private parties, sub-contracting for other infrastructure companies and also trading of certain construction material. Company is also engaged in trading activities, wherein it trades construction materials, mainly steel and cement. Revenue from Civil works is around 97.85% and from Trading is around 2.15% for FY17. On financial performance front, GCDL has posted turnover/net profits of Rs. 42.25 cr. / Rs. 1.49 cr. (FY13), Rs. 56.74 cr. / Rs. 1.97 cr. (FY14), Rs. 49.95 cr. / Rs. 1.90 cr. (FY15), Rs. 48.22 cr. / Rs. 1.75 cr. (FY16) and Rs. 45.27 cr. / Rs. 1.79 cr. (FY17). For upto Q3 of FY18, it has earned net profit of Rs. 1.35 cr. on a turnover of Rs. 33.99 cr. From financials, company has shown decline over the years in top line and bottom line. Issue is priced at a P/BV of 1.35 on the basis of NAV of Rs. 67.53 post issue. For last three fiscals, it has posted an average EPS of Rs. 5.91 and an average RoNW of 9.26%. If we annualise latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 18 against industry composite of 35. As per offer documents, it has indicated listed peers as CMM Infra, Dilip Buildcon and KNR Construction that are trading at a P/E of around 29, 22 and 17 respectively as on 16.03.18. So issue is fully priced as per latest earnings. On merchant banker's front, this is 30th IPO in the past three years (includes 1 main board IPO and the rest SME). Out of last 10 listings, 4 opened at discount, 1 at par, 4 with the premium ranging from 1% to 20%. The only main board listing (Apollo Micro) opened at a premium of around 73.8% on the day of listing and then price decreased near to issue price. As per financials, company is showing declining trend, RoNW is 14.47% for last three fiscals and issue is fully priced as per latest earnings. So we give AVOID rating to this SME IPO.

• 1 Mr. Mahesh Shah
• 2 Mr. Mamta Shah