Started in 2003, Rail Vikas Nigam Limited is a wholly owned government company, a Miniratna (Category - I) Schedule 'A' Central Public Sector Enterprise, incorporated by the Ministry of Railways ("MoR"). Company is in the business of executing all types of railway projects including new lines, doubling, gauge conversion, railway electrification, metro projects, workshops, major bridges, construction of cable stayed bridges, institution buildings etc. Company's activities under the various plan heads can be classified as under:1. New lines: This includes augmenting the rail network by laying new lines. The objective of laying new lines includes achieving seamless multi-modal transportation network across the country and connecting remote areas.2. Doubling: Doubling involves the provision of additional lines by way of doubling the existing routes to enable the Indian Railways to ease out traffic constraints of single line and increase the charted capacity. Company is a significant contributor to the doubling projects and has been contributing to approximately one third of the total doubling being completed / commissioned on Indian Railways for the last three years. 3. Gauge conversion: This includes conversion of meter gauge lines to broad gauge railway lines.4. Railway electrification: This includes electrification of current un-electrified rail network and electrification on the new rail network.5. Metropolitan transport projects: This includes setting up of metro lines and suburban network in metropolitan cities.6. Workshops: This includes workshops for repairing rolling stock and other repairs.7. Others: This includes but is not limited to construction of car sheds, construction of bridges including rail over bridges, building of sub-ways in lieu of crossings etc. Since its inception in 2003, MoR has transferred 172 projects to them of which 166 projects are sanctioned for execution. Out of these, 60 projects have been fully completed totalling to Rs. 1,67,777.00 million and the balance are ongoing. RVNL has an order book of Rs 6,86,836.20 million as on February 28, 2018 which includes 106 ongoing projects. Company generally works on a turnkey basis and undertake the full cycle of project development from conceptualisation to commissioning including stages of design, preparation of estimates, calling and award of contracts, project and contract management, etc. RVNL undertakes the projects spread all over the country and for efficient implementation of projects, 37 project implementation units (PIUs) have been established at different locations to execute projects in their geographical hinterland. They are located at Delhi, Mumbai, Kolkata (4 units), Chennai, Secunderabad (2 units), Bhubaneshwar (3 units), Bhopal (3 units), Jhansi, Kota, Jodhpur, Waltair (2 units), Bengaluru, Pune, Raipur (3 units), Lucknow (2 units), Rishikesh, Ahmedabad (2 units), Kanpur, Varanasi (2 units), Chandigarh, Mughalsarai, Ambala and Guwahati. Major client of RVNL is the Indian Railways and other clients include various central and state government ministries, departments, and public sector undertakings. As of February 28, 2018, Company has a total of 598 employees which comprised of 156 regular personnel and 442 deputationalists from MoR. As per financial performance, RVNL has posted total income/net profits of Rs. 3269.78 cr. / Rs. 336.78 cr. (FY15), Rs. 4720.29 cr. / Rs. 429.02 cr. (FY16), Rs. 6162.88 cr. / Rs. 443.31 cr. (FY17) and Rs. 7822.29 cr. / Rs. 569.36 cr. (FY18). For upto H1 of FY19, it has reported net profit of Rs. 253.64 cr. on total revenue of Rs. 3770.40 cr. So company has posted consistent growth over last couple of years. As per management, the first half always has a lean period of monsoon that affects its revenue. RVNL has posted an average EPS of Rs. 2.42 and average RoNW of 13.51% for last three fiscals. Issue is priced at a P/BV of 0.98 as per NAV of 19.48 on 30.09.18. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of around 7.81 and as per FY18 earnings P/E is around 6.96. So issue looks very reasonably priced. On BRLM's front, three merchant bankers associated with this issue and have handled 18 public issues in the past three years and out of that 6 were opened below issue price on listing date. As per financials, company's growth is consistent and good, RoNW is 13.51% for last three fiscals and issue is priced at P/E of around 7.81 as per latest earnings. Company is in business of executing all kinds of railway projects and with focus of Government high on infrastructure development and high speed rail network, so next couple years will be high growth. So we give "SUBSCRIBE FOR LONG TERM" rating to this IPO.
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