Started in 1974, RITES Ltd is a wholly owned Government Company under MoR, a Miniratna (Category – I) Schedule 'A' Public Sector Enterprise and a leading player in the transport consultancy and engineering sector in India. They have an experience spanning 44 years and have undertaken projects in over 55 countries including Asia, Africa, Latin America, South America and Middle East regions. They are a multidisciplinary engineering and consultancy organisation providing diversified and comprehensive array of services from concept to commissioning in all facets of transport infrastructure and related technologies. RITES has significant presence as a transport infrastructure consultancy organisation in the railway sector. However, company also provides consultancy services across other infrastructure and energy market sectors including urban transport, roads and highways, ports, inland waterways, airports, institutional buildings, ropeways, power procurement and renewable energy. Since its inception in 1974, they have evolved from their origins of providing transport infrastructure consultancy and quality assurance services and have developed expertise in:1. Design, engineering and consultancy services in transport infrastructure sector with focus on railways, urban transport, roads and highways, ports, inland waterways, airports and ropeways;2. Leasing, export, maintenance and rehabilitation of locomotives and rolling stock;3. Undertaking turnkey projects on engineering, procurement and construction basis for railway line, track doubling, 3rd line, railway electrification, upgradation works for railway transport systems and workshops, railway stations, and construction of institutional/ residential/ commercial buildings, both with or without equity participation; and4. Wagon manufacturing, renewable energy generation and power procurement for Indian Railways through their collaborations by way of joint venture arrangements, subsidiaries or consortium arrangements. RITES has separate specialised divisions for rail infrastructure, buildings and airports, highways and ports, urban infrastructure, export, quality assurance, technical services, privatisation and concessions and financial services. Each of these divisions has their own segregated strategic business units, regional offices and project site offices so as to enable specialisation across the diversified market segments of the Company. In India, the clients of company include various central and state government ministries, departments, instrumentalities as well as local government bodies and public sector undertakings. These include Indian Railways, NTPC, Dedicated FreightCorridor Corporation of India Limited, High Speed Rail Corporation of India Limited, Public Works Department, DMRC, Steel Authority of India Limited, Rashtriya Ispat Nigam Limited, Hindustan Petroleum Corporation Limited,Bharat Coking Coal Limited, Metro Link Express for Gandhinagar and Ahmedabad (MEGA) Company Limited, Indian Port Rail Corporation Limited, Airports Authority of India, among others. They also engage with various large private sector corporations including L&T Metro Rail (Hyderabad) Limited, Kanti Bijlee Utpadan Nigam Limited(KBUNL), Cimmco Limited, Titagrah Wagons Limited, Snowmex Engineers Limited, Unity Infraprojects Limited, Rajdeep Buildcon Private Limited, Mahalsa Constructions Private Limited, Marymatha Constructions Limited, AFCON Infrastructure Limited, INCAP, ARK Services, MNEC Consultants Private Limited, Indian GeotechnicalServices Limited, Geokno India Private Limited and NATRIP Implementation Society among others. Company's order book comprises of anticipated revenues from the unexecuted portions of existing contracts (including signed contracts for which all pre – conditions for entry into force have been met and letters of award issued by various clients prior to execution of the final contract) as of a particular date and As of March 31, 2018, company has total order book of Rs 4818.68 Cr. As of March 31, 2018, company has a total of 3,349 employees on its payroll. As per financial performance, RITES has posted total income/net profits of Rs. 1083.05 cr. / Rs. 238.12 cr. (FY13), Rs. 1223.47 cr. / Rs. 258.50 cr. (FY14), Rs. 1159.11 cr. / Rs. 314.06 cr. (FY15), Rs. 1226.73 cr. / Rs. 281.73 cr. (FY16) and Rs. 1563.72 cr. / Rs. 363.01 cr. (FY17). For upto Q3 of FY18, it has reported net profit of Rs. 248.53 cr. on total revenue of Rs. 1061.06 cr. So company has posted consistent growth over last couple of years except FY15 and FY16. RITES has posted an average EPS of Rs. 16.16 and average RoNW of 16.87% for last three fiscals. Issue is priced at a P/BV of 1.7 as per NAV of 108.6 on 31.12.17. If we annualise latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 11.42. As per RHP, there is no listed companies which can be compared with it. As per latest earnings, issue looks reasonably priced. On BRLM's front, four merchant bankers associated with this issue and have handled 41 public issues in the past three years. When we take recent 10 IPOs of each BRLM then out of those 4 issues opened below their offer price and 4 opened at par on listing dates. As per financials, company's growth is good except FY15 and FY16, RoNW is 16.87% for last three fiscals and issue is priced at P/E of around 11.42 as per latest earnings. Company is a leading player in the transport consultancy and engineering sector in India. It has total order book of 4818.68 Cr as on March 31, 2018 and Government's focus on Rail and Infrastructure development will be very beneficial for this company. So we give "SUBSCRIBE FOR LONG TERM" rating to this IPO with some limited listing gains.
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