SRM Contractors Limited is an engineering construction and development company engaged primarily in the construction of roads (including bridges), tunnels, slope stabilisation works and other miscellaneous civil construction activities in the Union Territories of Jammu & Kashmir and Ladakh. They undertake construction works both as an EPC contractor and on an item rate basis for infrastructure projects. The Company also undertakes sub-contracting assignments of infrastructure construction projects. They have a track record of successful execution of road, tunnel and slope stabilization projects in the difficult terrain of union territories of Jammu & Kashmir and Ladakh and they, thus, believe that they have developed the expertise and know-how to undertake infrastructure construction projects in difficult terrains. They are pre-qualified to bid independently on projects, tendered by departments of governmental authorities and other entities funded by the GoI, of contract value up to Rs 30,000 lakhs and Rs 50,000 lakhs for EPC contracts pertaining to construction of roads (including bridges) and for construction of tunnel respectively. They have further forayed into executing other infrastructure projects such as standalone bridges, larger slope stabilisation works and other miscellaneous civil construction activities in order to capitalise on such rising opportunities. Recently, they have also been awarded with a contract for slope stabilization work in the state of Uttrakhand. The order book in terms of value of contracts, including subcontracting assignments, was Rs 11,9931.33 lakhs as on January 31, 2024, Rs 83,469.37 lakhs as on March 31, 2023, Rs 25,788.32 lakhs as on March 31, 2022, and Rs 43,257.33 lakhs as on March 31, 2021. Among the twenty-one (21) infrastructure construction projects that they are currently executing, eleven (11) projects aggregating to a total contract value of Rs 72,056.00 lakhs relates to road construction, five (5) projects of total contract value of Rs 25,821.50 lakhs relates to tunnel construction, four (4) projects of total contract value of Rs 20,388.80 lakhs relates to slope stabilisation works and one (1) project of total contract value of Rs 1,665.64 lakhs relates to other construction activity. At present, they are primarily bidding for construction of roads including bridges, tunnel works, slope stabilisation works and other miscellaneous civil construction activities in the Union Territories of Jammu & Kashmir and Ladakh and state of Uttarakhand. Recently, they have also been awarded two contracts for slope stabilization work in the state of Uttarakhand and one contract for slope rehabilitation works Arunachal Pradesh and one contract for slope protection work in Himachal Pradesh, respectively. The major clients include National Highways & Infrastructure Development Corporation Limited - Ministry of Road Transport & Highways, Government of India (NHIDCL), Ministry of Road Transport and Highways (MoRTH), Konkan Railway Corporation Limited (KRCL), Government of Jammu and Kashmir Economic Reconstruction Agency (ERA, Jammu), Border Road Organisation (BRO), Public Work (R&B) Department, Jammu & Kashmir (PWD, J&K), Northern Railway, Irrigation & Flood Control Department, J&K, J&K Rural Roads Development Agency (JKRRDA). The Company also undertakes subcontracting assignments from third party major infrastructure and construction entities executing projects in the Union Territories of Jammu & Kashmir. As per financial performance, SRM Contractors Limited has posted total income / net profits of Rs 161.95 Cr / Rs 8.27 Cr (FY21), Rs 265.51 Cr / Rs 17.57 Cr (FY22), Rs 300.65 Cr / Rs 18.75 Cr (FY23) and Rs 242.28 Cr / Rs 21.07 Cr (Q3 FY24). So as per previous financials data, company has shown good growth. Company has an average EPS of Rs 80.46 and average RoNW of 29.68% for last three fiscals. Issue is priced at a P/BV of 4.17 as per NAV of 50.31 as on 31.12.23. If we attribute latest earnings of FY22, FY23 and annualised FY24 on fully diluted equity post issue, then asking price is at a P/E of around 27.43, 25.70 and 17.15 respectively, which looks fully priced. As per RHP, comparison between listed peers is shown in above table. Interactive Financial Services Limited: This is 15th Main Board IPO from this BRLM. From last 14 Main Board IPOs, four opened below issue price and remaining opened above issue price on the day of listing. As of now, from last 14 Main Board IPOs, ten are trading below issue price and remaining are trading above issue price.( As on 20.03.2024 ) As per financials, SRM Contractors Limited has shown good results, RoNW is 29.68% and P/E is respectively 27.43, 25.70 and 17.15 as per FY22, FY23 and annualised FY24 earnings. So, issue looks fully priced compared to peers. Company is in business of engineering construction and development mainly in J & K and Ladakh, which is highly competitive and fragmented segment. Other listed peers are available nearly at similar valuations. So, we give NEUTRAL rating for this IPO. Readers must consult a qualified financial advisor prior to making any actual investment decisions.
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