Ganesh Infraworld Ltd. IPO: Key Details

Ganesh Infraworld

• Ganesh Infraworld is coming out with an initial public offering (IPO) of 1,18,76,800 equity shares in a price band Rs 78-83 per equity share.
• The issue will open on November 29, 2024 and will close on December 3, 2024.
• The shares will be listed on SME Platform of NSE.
• The face value of the share is Rs 5 and is priced 15.60 times of its face value on the lower side and 16.60 times on the higher side.
• Book running lead manager to the issue is Vivro Financial Services.
• Compliance Officer for the issue is Bharti Mundhra.

Profile of the company

Ganesh Infraworld is a construction company offering a range of construction and allied services across industrial civil projects, residential & commercial buildings, road construction, railway infrastructure projects, power projects and water distribution projects in India. It specializes in integrated engineering, procurement, and construction (EPC) services and provide its services across the construction value chain, ranging from planning, design, construction including mechanical, electrical, civil and industrial and allied services and supply of materials for the execution of services. It conducts its business operations primarily through three verticals, namely, (i) civil and electrical infrastructure projects; (ii) road and rail infrastructure development projects; and (iii) water infrastructure development projects, as a single operating segment of engineering and construction.

Over the years, the company has successfully executed several engineering projects as sub-contractor to some of the established and large engineering and construction companies in India. Its execution capabilities and timely execution of projects have helped it to procure repeat orders and achieve the growth in its revenue from operations from Rs 8,023.88 lakh for Fiscal 2022 to Rs 29,033.71 lakh for Fiscal 2024, and an order book of Rs 57,485.53 lakh as on August 31, 2024 comprising 41 ongoing projects.

The company started its business operations in the state of West Bengal in the year 2017 and expanded its operations in the state of Rajasthan, Uttar Pradesh, Maharashtra, Odisha, Haryana, Jharkhand, Bihar, Jammu & Kashmir, Andhra Pradesh and Chhattisgarh since then. Over a period of last three financial years, the company has executed various projects which includes water distribution, electrical infrastructure, road infrastructure, and civil construction, in the state of West Bengal, Rajasthan, Uttar Pradesh and Maharashtra. 

Proceed is being used for:

• Meeting long-term working capital requirements
• General corporate purposes

Industry Overview

In India, the real estate sector is the second-highest employment generator, after the agriculture sector. India’s real estate sector is expected to expand to $5.8 trillion by 2047, contributing 15.5% to the GDP from an existing share of 7.3%. In 2023, luxury home sales in India priced at Rs 4 crore ($481,927) and above surged by 75%, doubling their share in total housing sales. Real estate sector in India is expected to reach $1 trillion by 2030. By 2025, it will contribute 13% to the country’s GDP. Rapid urbanisation bodes well for the sector. The number of Indians living in urban areas is expected to reach 542.7 million by 2025 and 675.5 million by 2035. Construction is the third-largest sector in terms of FDI inflow. FDI in the sector (including construction development & activities) stood at US$ 60.53 billion from April 2000-March 2024. Government of India’s ‘Housing for All’ initiative is expected to bring $1.3 trillion investment in the housing sector by 2025. India's Global Real Estate Transparency Index ranking improved by three notches from 39 to 36 since the past eight years from 2014 until 2022 on the back of regulatory reforms, better market data and green initiatives, according to property consultant JLL. Boosted by supply from established developers, stable economic conditions, and positive buyer sentiments, first quarter of 2024 saw record residential sales with 74,486 units sold.

In India, only 3% and 2% of the total roads in India are of state highways and national highway respectively, rest 95% of total roads in India are categories under other roads. India has the second-largest road network in the world, spanning over 6.7 million kms. Over 64.5% of all goods in the country are transported through roads, while 90% of the total passenger traffic uses road network to commute. Under the Interim Budget 2024-25, the Government of India allocated Rs. 2.78 lakh crore ($33.46 billion) to the Ministry of Road Transport and Highways. The Government of India allocated Rs. 111 lakh crore ($13.14 billion) under the National Infrastructure Pipeline for FY19-FY25. The Roads sector is expected to account for 18% capital expenditure over FY19-FY25.

The Central government has increased its capital expenditure (capex) allocation to US$ 133.9 billion (Rs. 11.11 trillion) for the fiscal year beginning April 1, 2024, with a focus on advancing India's infrastructure, as part of a strategic move to stimulate economic growth. An increase of 11.1% from the previous year, the FY25 interim budget allots US$ 133.9 billion (Rs. 11.11 trillion) for capital expenditures, or 3.4% of GDP. With a 37% increase in the current fiscal year, capital expenditures (capex) are on the rise, which bolsters ongoing infrastructure development and fits with Vision 202. 7 goals for India's economic growth to become a $5 trillion economy. In order to anticipate private sector investment and to address employment and consumption in rural India, the budget places a strong emphasis on the development of roads, shipping, and railways. India's ambitious plan calls for spending $1.723 trillion (approximately Rs 143 trillion) on infrastructure between FY24 and FY30, with a particular emphasis on power, roads, and developing industries like renewable energy and electric vehicles. 

Pros and strengths

Strong order book from large engineering and construction companies: The company has orders worth Rs 57,485.53 lakh as on August 31, 2024 consisting 41 ongoing projects related to civil and electrical infrastructure, road and rail infrastructure development and water infrastructure development projects. Timely execution capacities, optimum resource utilisation, strong relationships with large contractors as well as the price competitiveness of its project offers provide it competitive edge and enable it to secure repeat contracts from the contractors and large EPC players. The company’s order book provides it with visibility of future revenues, sustainable growth opportunities and ability to enhance shareholder’s value in the future. With its experience of delivering infrastructure projects in diverse segments, the company is able to pursue broader range of projects and consequently able to add quality projects to its order book.

End to end project management and execution capabilities: The company’s promoter and senior management include a team of technical and experienced professionals in the construction industry. Throughout its journey, it has successfully executed diverse range of construction projects such as industrial construction projects, non-industrial construction projects (including construction of residential and commercial buildings), plant and warehouses projects, electrical engineering projects, road and rail infrastructure development projects and water infrastructure development projects. The company has in-house engineering capabilities for both project design and construction supported by professionals with industry specific technical knowledge. The company offers integrated construction solution tailored to its clients’ specific needs, leveraging its designing, engineering, and project execution capabilities.

Managing diverse segments of infrastructure projects: The company handles a variety of construction projects across various fields and industries. Its projects include industrial construction projects, non-industrial construction projects (including construction of residential and commercial buildings), plant and warehouses projects, electrical engineering projects, road and rail infrastructure development projects and water infrastructure development projects. Its diverse range of projects helps it to mitigate risks in the events of industry setbacks. As of August 31, 2024, the company is currently engaged in 41 ongoing projects, collectively valued at around Rs 57,485.53 lakh across 13 different states and across different segments.

Risks and concerns  

Maximum revenue comes from limited clients: The company derives a significant portion of its revenues from a limited number of clients. The company garnered 64.94%, 50.27% and 56.84% of its total revenue from top 10 clients in FY24, FY23 and FY22 respectively. The company might continue to derive a material portion of its revenues from its key clients. While the composition and mix of its top 5 and top 10 clients keeps changing from year to year, if any or all of its key clients cease doing business or substantially reduce their dealings with it, the company’s revenues could decline, which may have a material adverse effect on its business, results of operations, cash flows and financial condition.

Geographical constrain: While the company has a diversified geographical presence, its projects have historically been concentrated in the state of West Bengal. The company has generated 40.19%, 55.09% and 43.93% of its total revenue from West Bengal in FY24, FY23 and FY22 respectively. While the company has and it further strives to diversify across states and reduce its concentration risk, there can be no assurance that any will not have an adverse impact on its business. If the company is unable to mitigate any concentration risk, it may not be able to develop its business effectively and its business operations, financial condition and results of operation could be adversely affected. 

Business is subject to seasonal variation: The company’s construction work is subject to seasonal variations. For example, it typically experiences, slower work progress in monsoon season as compared to rest of the year. Further, there is general slowdown and shortage in contract labourers during festival season, generally in month of September to November. Due to these factors, comparisons of revenue and operating results between the same periods within a single year, or between different periods in different fiscals, are not necessarily meaningful and should not be relied on as indicators of its performance. The company’s account for this seasonality in work progress and cash flow projections. However, it cannot assure, that in future, it will always be able to accurately forecast its project schedule. If its estimates materially differ from actual work progress, it may experience either delay or halt in project completion, which in turn could adversely affect its business, results of operations, financial condition and prospects.

Outlook

Ganesh Infraworld is a construction company offering a wide range of construction-related services. The company specializes in the construction of industrial, civil, residential, and commercial buildings, as well as road, railway, power, and water distribution projects across India. It has clients such as Magnum Ventures, Raikela Iron Ore Mines, JD Cables, Celica Motocorp, Jain International, and Nirmala Developers. On the concern side, its projects have historically been concentrated in the state of West Bengal and any changes affecting the policies, laws and regulations or the political and economic environment in the region may adversely impact its business, financial condition and results of operations. Moreover, the company derives a significant portion of its revenues from a limited number of clients. The loss of any significant clients may have an adverse effect on its business, financial condition, results of operations, and prospects.

The company is coming out with a maiden IPO of 1,18,76,800 equity shares of Rs 5 each. The issue has been offered in a price band of Rs 78-83 per equity share. The aggregate size of the offer is around Rs 92.64 crore to Rs 98.58 crore based on lower and upper price band respectively. On performance front, the company’s total income increased by 116.08% from Rs 13,504.85 lakh in financial year ended March 31, 2023 to Rs 29,181.12 lakh in financial year ended March 31, 2024, primarily due to an increase in revenue from operations. Moreover, the profit after tax of the company increased by 198.41% from Rs 520.92 lakh in fiscal 2023 to Rs 1,554.47 lakh in fiscal 2024.

The core belief of the company lies in being client-centric and maintaining strong relationships with its clients. Completing projects on time and with acceptable quality levels reinforce its clients' trust in it. The company’s relationship strengthens its partnerships with large infrastructure, engineering and construction companies. It aims to use its previous experience to secure contractor and subcontractor’s roles for government-initiated projects in areas such as irrigation, water treatment, power projects, government building and roads constructions through leveraging its prior work for government and non-government subcontractor. Its prior work experience gives it a competitive edge over its competitors in the industry.