Kapston Facilities Management Ltd

Started in 2009, Kapston Facilities Management Limited is a Hyderabad based provider of private security and facility management services in India. It is one of the leading service provides of Security Services in Telangana and Andhra Pradesh. The company has also partnered with 'National Skill Development Corporation' (NSDC) and 'Deen Dayal Upadhyaya Grameen Kaushalya Yojana' (DDUGKY) project under the Ministry of Rural Development (MoRD) in the states of Maharashtra, Karnataka, Odisha, Assam and Kerala. Kapston has a widespread network of 4 branch offices and 8 training centres across 10 cities in 8 states. Presently the company has around 6394 employees across different locations from which 3785 employed for security services and 2380 for facility management services. Company serves various segments including IT and ITES, MNCs, Corporates, Industries, Banks, Hotels, Hospitals, Malls & Retail, Infrastructure, etc. On financial performance front, KFML has posted total income/net profits of Rs. 28.00 cr. / Rs. 1.15 cr. (FY13), Rs. 41.52 cr. / Rs. 1.45 cr. (FY14), Rs. 58.91 cr. / Rs. 1.99 cr. (FY15), Rs. 74.99 cr. / Rs. 2.16 cr. (FY16) and Rs. 93.88 cr. / Rs. 3.06 cr. (FY17). For upto Q3 of FY18, it has earned net profit of Rs. 4.38 cr. on a turnover of Rs. 84.88 cr. From financials, company has shown excellent growth in top line and bottom line. Issue is priced at a P/BV of 3.15 on the basis of NAV of Rs. 29.22 post issue. For last three fiscals, it has posted an average EPS of Rs. 3.58 and an average RoNW of 31.53%. If we annualise latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 13.70 against industry composite of 96.12. As per offer documents, it has indicated listed peers as Quess Corp Limited and Security & Intelligence Services India Ltd that are trading at a P/E of around 50 and 41 as on 16.03.18. So issue is reasonably priced as per latest earnings. On merchant banker's front, this is 1st IPO, so there is no track record. As per financials, company's performance is excellent, RoNW is 31.53% for last three fiscals and issue is reasonably priced as per latest earnings. But there is no track record associated with merchant banker. So we give NEUTRAL rating to this SME IPO.

• 1 Mr. Srikanth Kodali
• 2 Mr. Radha Krishna Pinnamaneni