Karda Construction Ltd

Started in 2007, Karda Constructions Limited is a real estate development company primarily operating in Nashik, focused on quality and affordable developments. The Karda Group is a well established Nashik based group having its presence in the construction industry for more than two decades. In the years following its inception the group concentrated on developing affordable housing in the residential segment and from year 2001 onwards, the group diversified into commercial segment. Company has successfully completed and delivered 15 residential projects and office space projects like Hari Smruti, Hari Amantran, Hari Shrushti, Hari Kunj, Hari NiwasHari Niketan, Hari Sankalp etc KCL currently have 13 Ongoing and 3 Planned projects, which they expect to provide an estimated total Carpet Area of 17,59,017 square feet. Further in order to expand their portfolio of business activities Company has recently ventured into Construction Contracts. As on the date of this Draft Red Herring Prospectus Company has successfully secured 4 Government contracts, 3 of which are of Goa Government and 1 of Maharashtra Government. As on the date of this DRHP, their land reserves included approximately 3,00,754 square feet of estimated Developable Land Area in and around Nashik. On performance front, KCL has posted turnover/net profits of Rs. 43.29 cr. / Rs. 2.70 cr. (FY13), Rs. 59.07 cr. / Rs. 3.61 cr. (FY14), Rs. 46.53 cr. / Rs. 3.08 cr. (FY15), Rs. 105.94 cr. / Rs. 6.37 cr. (FY16) and Rs. 110.02 cr. / Rs. 8.03 cr. (FY17). For H1 of FY18, it has reported net profit of Rs. 5.52 cr. on a turnover of Rs. 45.7 cr. Thus company has posted good growth over last couple of years except FY15. KCL has posted an average EPS of Rs. 6.65 and average RoNW of 25.81% for last three fiscals. Issue is priced at a P/BV of 5.01 on NAV of 35.87 as on 30.09.17. Listed peers as per RHP, industry average P/E is 40.20. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of around 20, which looks fully priced as peers details are Kolte Patil (23), Prerna Infra (5), Arihant Super (20). On merchant banker's front, this is 26th IPO in the past three years (including 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, but its currently trading nearly at par. As per financials, company's growth is good, RoNW is 25.81% for last three fiscals and issue is priced at P/E of around 20 as per latest earnings. Company is in construction business and primarily focused on affordable housing segment, so future looks good. But in current market scenario this fully priced IPO may not able to give good listing gains. So we give NEUTRAL rating to this IPO.

• 1 Mr. Naresh Karda