Rudra Gas Enterprise
- Rudra Gas Enterprise is coming out with an initial public offering (IPO) of 22,48,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 63 per equity share.
- The issue will open for subscription on February 8, 2024 and will close on February 12, 2024.
- The shares will be listed on BSE SME Platform.
- The share is priced at 6.30 times higher to its face value of Rs 10.
- Book running lead manager to the issue is Beeline Capital Advisors.
- Compliance Officer for the issue is Gauravkumar Pushkarrai Jani.
Profile of the company
Rudra Gas Enterprise is engaged in various facets of the infrastructure sector. It is mainly engaged in gas distribution network projects, fiber cable network, renting of construction machinery and vehicles. It provides end-to-end solutions for the city gas distribution sector. Its expertise is in pipeline construction, civil works, and operation and maintenance, for pipeline networks in city gas distribution. Its services ensure the safe and efficient transportation of vital resources such as Compressed Natural Gas (CNG) and Piped Natural Gas (PNG). In Fiber cable network sector, the company offers services of installations of optical Fiber cable and maintenance thereof. Its commitment to reliability and quality makes it a trusted partner in these vital sectors. Its main focus is on delivering projects in a timely manner while upholding the highest standards of safety. It understands the importance of completing projects on schedule, meeting deadlines, and ensuring the well-being of its workforce, stakeholders, and the surrounding communities. Its client base comprises of established players in the city gas distribution industry and telecommunication industry, both in public and private sector.
The company has grown significantly during the past, under the leadership and guidance of its Promoters, as they hold the technical experience in the gas pipeline infrastructure industry and are the guiding force behind the successful execution of its business strategies over the years. They have successfully implemented business strategies that have shown its growth in the industry. Their extensive technical expertise, industry knowledge, and valuable relationships have been instrumental in driving its success and also give the company competitive advantage to expand its geographical and client presence in existing, while exploring new avenues for growth in future. Their foresightedness and vision have helped it to identify opportunities and capitalize on the same. It has and expects to continue to benefit from their strong industry expertise and relationships with clients.
Over the years, the company has successfully executed more than 50 projects its major completed projects quantify to approximately Rs 12,708 lakh. Its execution capabilities have grown significantly with time, both in terms of the size of projects that it bids for and execute, and the number of projects that it executes simultaneously. The company has demonstrated a prominent presence in execution of pipeline projects and has developed significant expertise and competencies in this field. The company aims to leverage on its strength and continue expansion into sector which will put the company to desired growth trajectory.
Proceed is being used for:
- Meeting working capital requirements.
- General corporate purposes.
Industry overview
Indian economy is driven through multiple economic sectors and infrastructure is one of the major sector contributions to continuous growth. Infrastructure development is crucial to achieve the India 2047 vision for a $40 trillion economy and be reclassified from a developing economy to a developed economy. In the aftermath of COVID-19 and the digitisation of the world, the focus rests not only on physical infrastructure, but on digital and social infrastructure as well. In order to meet India’s aim of reaching a $5 trillion economy by 2025, infrastructure development is the need of the hour. The government has launched the National Infrastructure Pipeline (NIP) combined with other initiatives such as ‘Make in India’ and the production-linked incentives (PLI) scheme to augment the growth of the infrastructure sector.
The country has experienced sustained economic growth over the past few years resulting in increased industrialization, urbanization and infrastructure development along with the rise in total sales of vehicles. These are the major factors which have led to overall higher demand for transportation, energy and fuel, driving up the consumption of fuels. Meanwhile, the Government has approved the revised domestic natural gas pricing guidelines for gas produced from nomination fields of ONGC/OIL, New Exploration Licensing Policy (NELP) blocks and pre-NELP blocks, where Production Sharing Contract (PSC) provides for Government's approval of prices. The price of such natural gas shall be 10% of the monthly average of Indian Crude Basket and shall be notified on a monthly basis. For the gas produced by ONGC & OIL from their nomination blocks, the Administered Price Mechanism (APM) price shall be subject to a floor and a ceiling. Gas produced from new wells or well interventions in the nomination fields of ONGC & OIL, would be allowed a premium of 20% over the APM price. The reforms have led to significant decrease in prices of Piped Natural Gas (PNG) for households and Compressed Natural Gas (CNG) for transport.
The outlook of the Indian infrastructure sector looks optimistic in line with Prime Minister Narendra Modi’s vision to make India a ‘Developed Nation’ by 2047 as infrastructure is a crucial pillar to ensure good governance across sectors. The country's infrastructure sector is growing at a significant pace in areas such as roads, highways and civil aviation. The PM Gati Shakti master plan is going to change the face of India’s infrastructure. Infrastructure is a sector that will continue to attract strong capital inflows, especially with structural reforms, digitisation of logistics and infrastructure-focused wealth funds to aid investment. These Investments have the potential to create a true multiplier effect to take the economy on a higher growth trajectory. The collective development of India’s infrastructure propels India’s economic growth. With increased demand for labour, goods and capital expenditure on infrastructure, there is an increase in industrial growth.
Pros and strengths
Robust infrastructure and effective project execution: The company’s success in the gas pipeline business relies on owning and maintaining a large fleet of equipment. This enables it to meet diverse customer requirements and mobilize the necessary equipment at project sites. It utilizes a combination of owned and leased equipment, ensuring the deployment of the right machinery for each project's needs. With state-of-the-art vehicles and specialized construction equipment, it can undertake projects of various scales and complexities. Its focus on equipment maintenance guarantees smooth operations and timely project completion, while upholding the highest quality standards. It continuously upgrades its fleet to stay ahead of technological advancements and deliver exceptional results, demonstrating its commitment to operational excellence and customer satisfaction. Its strong project execution capabilities have enabled it to complete various large and complex projects within the stipulated delivery timelines.
Expanding operational capabilities: With the expansion of City Gas Distribution (CGD) market and the increase in the number of Geographical Areas (GAs) covered under the CGD network, the company has significant opportunities for growth. The recent government policies have opened up avenues for executing CGD projects, including the construction of CNG stations, in various cities and towns across the country. The company’s established presence in the CGD sector positions it well to capitalize on these lucrative opportunities and scale its operations effectively.
Establishing long-term client relationships and driving repeat business: The company has established a strong reputation in the industry, earning repeat orders from several prominent clients, even in the face of increased competition. These clients include major gas companies throughout the country, with whom it has developed long-term partnerships. It attributes this success to its commitment to addressing its clients’ needs, allowing it to maintain lasting working relationships and improve its retention strategy. The company’s existing client relationships serves as a competitive advantage, helping it attract new clients and expand its business. The experience gained from executing current projects enhances its understanding of client requirements, enabling it to evaluate future project scopes and associated risks more effectively when bidding for new opportunities. It values the trust its clients place in it and strives to continually meet and exceed their expectations, solidifying its position in the industry.
Risks and concerns
Maximum revenue comes from top 10 customers: The company’s top ten customers contribute 94.77%, 99.85%, 96.46% and 99.85% of its total sales for the period ended October 31, 2023 and for the financial year ended on March 31, 2023, 2022 and 2021 respectively. The company is an integrated solution provider, offering a full range of Engineering, Procurement, Construction/ Commissioning (EPC) services in India. Its business operations are highly dependent on its customers and the loss of any of its customers may adversely affect its sales and consequently on its business and results of operations. The loss of one or more of these significant or key customers or a reduction in the amount of business it obtains from them could have an adverse effect on its business, results of operations, financial condition and cash flows. It cannot assure that it will be able to maintain historic levels of business and/or negotiate and execute long term contracts on terms that are commercially viable with its significant customers or that it will be able to significantly reduce customer concentration in the future. Any decline in its quality standards, growing competition and any change in demand may adversely affect its ability to retain them. It cannot assure that it shall generate the same quantum of business, or any business at all, and the loss of business from one or more of them may adversely affect its revenues and results of operations.
Dependent on few suppliers for purchase of products: The company’s top ten suppliers contribute 62.09%, 53.18%, 59.23% and 75.05% of its total purchase for the period ended October 31, 2023 and for the financial year ended on March 31, 2023, 2022 and 2021, respectively based on Restated financial statement. It cannot assure that it will be able to get the same quantum and quality of supplies, or any supplies at all, and the loss of supplies from one or more of them may adversely affect its purchase of stock and ultimately its revenue and results of operations. However, the composition and number of purchases from these suppliers might change as it continues seeking new suppliers for its product for better quality and price in the ordinary course of business. Though the company will not face substantial challenges in maintaining its business relationship with them or finding new suppliers, there can be no assurance that it will be able to maintain long term relationships with such suppliers or find new suppliers in time.
Revenues are subject to seasonal variations: The company’s business operations may be adversely affected by severe weather, which may require it to evacuate personnel or curtail services, may result in damage to a portion of its fleet of equipment or facilities resulting in the suspension of operations, and may prevent it from delivering materials to its project sites in accordance with contract schedules or generally reduce its productivity. The company’s operations may also be adversely affected by difficult working conditions and extremely high temperatures during summer months and during the monsoon season, each of which may restrict its ability to carry on engineering activities and fully utilize its resources. These factors may make it difficult for the company to prepare accurate internal financial forecasts. In addition, Business of the company is seasonal in monsoon and summer season, efficiency of engineering work reduces during monsoon and summer season. As a result, its revenues and profits may vary significantly during different financial periods, and certain periods are not indicative of its financial position for the year.
Outlook
Rudra Gas Enterprise was founded in 2015 and is active in gas distribution network projects, fiber cable networks, construction equipment, and vehicle rental. The company provides services in the fields of pipeline construction, civil works, and operation and maintenance of pipeline networks in city gas distribution. The company also provides services for the installation of fiber optic cables and their maintenance. The company's customers include companies in the city gas distribution and telecommunications sectors, both in the public and private sectors. On the concern side, the company is dependent on a few customers. The loss of any of these large customers may adversely affect its revenues and profitability. Also, the company is dependent on a few suppliers for the purchase of products. The loss of any of these large suppliers may adversely affect its business operations.
The company is coming out with an IPO of 22,48,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 63 per equity share to mobilize Rs 14.16 crore. On performance front, the company’s total income increased by 12.76% from Rs 4,395.95 lakh in FY 21-22 to Rs 4,957.02 lakh in FY 22-23, primarily due to an increase in its revenue from operations and other income. Moreover, the company recorded an increase of 96.21% in its profit for the period from Rs 179.41 lakh in the FY 2022 to Rs 352.02 lakhs in the FY 2023. The Profit after Tax for the FY 22-23 was 7.12% of the total revenue and it was 4.09% of total revenue for the FY 21-22.
The company’s strategic objective is to further expand its operations in regions where it has already established a strong foundation, leveraging its existing contracts with local clients and suppliers, as well as its familiarity with local working conditions. The increasing demand for natural gas in India presents significant opportunities for growth in the pipeline infrastructure sector. Additionally, favourable government policies are expected to act as a catalyst for further industry expansion. The company’s goal is to strengthen its presence across the country, actively participate in the expansion of the City Gas Distribution (CGD) network and become a prominent player in CGD system development and Fiber Cable Network Project.
Download APP
