RBM Infracon coming with an IPO to raise Rs 8.37 crore

RBM Infracon

• RBM Infracon is coming out with an initial public offering (IPO) of 23,25,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 36 per equity share.
  
• The issue will open for subscription on December 23, 2022 and will close on December 27, 2022.
  
• The shares will be listed on NSE Emerge Platform.
  
• The share is priced 3.60 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 Puja Paras Mehta.
  

Profile of the company

The company is engaged in the business of engineering, execution, testing, commissioning operation and maintenance, particularly in the field of mechanical and rotary equipment for Oil & Gas Refineries, Gas Cracker Plants, Coal/Gas/WHR based Power Plants, Petrochemical, Chemicals, Cement, Fertilizers. The company is Class -I certified Boiler Repairer / Erector and System /Feed Line fabricator / Erector service provider under Indian Boiler Regulations- 1950. The company is involved in ARC (Annual Rate Contracts) Mechanical job (Static +Rotary) at Nayara in different plant like crude Crude ( CDU-VDU) , DHDS, FCCU, NHT-CCR, HMU-I & II , VGO –DHDT-ISOM , CPP ( Boiler , Piping HT job with IBR coordination ) , DCU( Coker) Utility , Off site , RTF (Pit area) dispatch , Rail and Jetty with around 650 Manpower and also involve in ARC maintenance job in RIL-Jamnagar and YARA-Babrala. The company has executed around 14 Turnaround Shutdowns Job including Mega/Mini Shutdowns in Reliance Industries, Nayara Energy (Formerly Known as Essar Oil) and Yara Fertilisers India & HMEL-Bathinda.

The company’s management always emphasis on core strength and policies that focus on technology and great deliverance. With a passion to set high standards of services, the management has always taken all measures to scale up as and when required only to deliver the best. It work diligently and has a wide range of equipment’s to cater to every need and to reach the client sensitivity and centricity. The company is well equipped with experienced team of construction personnel and equipment’s to execute the contracts with in house recourses & facilities. Over the years, the company has been evolved and grown exponentially into an initiative with a progressive outlook and a professional approach. It strives to provide innovative, integrated and satisfactory customized solutions to its clients as per their specific needs. It is positioned as a highly professional, reliable and safe, prompt & quality service provider in infrastructure service arena. It secures contracts in generally through one-to-one negotiation.

Proceed is being used for:

• Meeting Working Capital Requirements.
  
• General Corporate Purpose.
  
• Meeting Public Issue Expenses.
  

Industry overview

In Union Budget 2022-23, the government has given a massive push to the infrastructure sector by allocating Rs. 10 lakh crore ($ 130.57 billion) to enhance the infrastructure sector. The government expanded the ‘National Infrastructure Pipeline (NIP)’ to 9,335 projects. 217 projects worth Rs 1.10 lakh crore ($ 15.09 billion) were completed as of 2020. Private sector is emerging as a key player across various infrastructure segments, ranging from roads and communications to power and airports. Private investment into physical and social infrastructure is key to putting India in a high growth trajectory, which will make it a $ 5 trillion economy by 2024-25. Yearly private equity (PE) and venture capital (VC) investment in India is expected to surpass $ 65 billion in 2025. FDI in construction development (townships, housing, built-up infrastructure and construction development projects) and construction (infrastructure) activity sectors stood at $ 26.17 billion and $ 26.30 billion, respectively, between April 2000-December 2021.

Logistics and warehousing play an important role in the industrial advancement of the country. They are a fundamental part of business infrastructure and one of the key enablers in the global supply chain. Warehousing demand is expected to grow ~160% to reach 35 million sq. ft. in 2021. Of the total PE investments ($ 3,241 million) in real estate in Q1 FY21, the office segment attracted 71% share, followed by retail at 15% and residential and warehousing with 7% each. Investment in the logistics sector is expected to reach US$ 500 billion annually by 2025. Warehousing in India is expected to get investment of Rs 50,000 crore ($ 7.12 billion) by the end of 2020. Over the next 10 years, demand for urban freight is predicted to increase by 140%. Final-mile freight transit in Indian cities accounts for 50% of the total logistics expenditures in the country's increasing e-commerce supply chains. With every sixth urban person globally being an Indian, the real estate and construction sector holds significant opportunity for both global and domestic companies engaged across the value chain. India will need to construct 43,000 houses every day until 2022 to achieve the vision of Housing for All by 2022. Hundreds of new cities need to be developed over the next decade.

Pros and strengths

Continue to enhance project execution capabilities: The company intends to continue its focus in enhancing project execution capabilities so as to derive twin benefits of client satisfaction and improvements in operating margins. It will constantly endeavor to leverage its operating skills through its equipment and project management tools to increase productivity and maximize asset utilization in its on going projects. It has developed a reputation for undertaking challenging projects and completing such projects in a timely manner. It intends to continue its focus on performance and project execution ability in order to maximize its operating margins. To facilitate efficient and cost effective decision making, it intends to continue to strengthen its internal systems. Its ability to effectively manage projects will be crucial to its continued success.

Domain expertise and technical excellence: The company has a dedicated workforce, who is the strength and power of its organization. Its workforce is doing their individual bit in achieving its cumulative goals successfully. It has experienced management team with established processes. Its management team has a long-term vision and has proven its ability to achieve long term growth of the Company. Its Promoter has approximately three decades of experience in segment of Industrial repair and Maintenance services. The strength of its management team and their understanding of services will enable it to continue to take advantage of current and future market opportunities.

Capture the high growth opportunities in the India Infrastructure sector: The increasing levels of investment in infrastructure by governments and private industries will be major driver for growth in company's business in the foreseeable future. It intends to take advantage of the growing opportunities in infrastructure development by strengthening its expertise identifying new prospects for growth. 

Risks and concerns

Geographical concentration: Although majority of sales of the company is in the state of Gujarat especially in Jamnagar region. The company has presence in the statement of Maharashtra and Uttar Pradesh. Such geographical concentration of its business in this region heightens its exposure to adverse developments related to competition, as well as economic and demographic changes in this region which may adversely affect its business prospects, financial conditions and results of operations. It may not be able to leverage its experience in these regions to expand its operations in other parts of India, should it decide to further expand its operations. Further, factors such as competition, culture, regulatory regimes, business practices and customs, customer tastes, behaviour and preferences in the cities where it may plan to expand its operations may differ from Gujarat, and its experience in the Gujarat may not be applicable to these states.

Rely on third parties for the implementation of projects: The company may rely on third parties for the implementation of its projects. For each of such project, it generally enters into several arrangements with third parties. Accordingly, the timing and quality of construction of its contracts depends on the availability and skill of the sub-contractors. It may also engage casual workforce in its projects. Although its relationships with its subcontractors are cordial, it cannot assure that skilled subcontractors will continue to be available at reasonable rates and in the areas in which it execute its projects. In addition, even if some of these third parties do not timely or satisfactorily complete its orders, its reputation and financial condition could be adversely affected.

Face intense competition: In selecting contractors for the project, clients generally limit the tender to contractors that prequalifies based on several criterion including experience, technological capacity, Man Power availability and performance, quality standards, ability to execute the project within the present timeframe, sophisticated machines etc. Disqualification on any of these grounds will make it ineligible for bidding. These pre-qualification criteria are at the discretion of the clients and it cannot assure that it would continue to meet the pre-qualification criterion of its existing or prospective clients. This would have an adverse impact on the financials of the Company.

Outlook

RBM Infracon is primarily engaged in engineering, execution, testing, commissioning, operating & maintenance of mechanical and rotary equipment for oil & gas refineries, cement, fertilizers, Petrochemicals, Coal/Gas based power plants, etc. Its key business services include Fabrication & Erection of structural work, Fabrication & Erection of Piping, ARC maintenance, Turnaround, blasting & painting, Insulation and Refractory, Electrical and Instrumentation, NDT services, and others. The firm provides services at different plants like CDU-VDU, DHDS, NHT-CCR, HMU-I & II, CPP, DCU, Rail and Jetty and is also involved in ARC maintenance jobs in RIL-Jamnagar and YARA-Babrala. It has successfully executed 14 Turnaround Shutdowns at Reliance Industries Ltd (RIL), Nayara Energy, and Yara Fertilisers. On the concern side, the company’s business demands substantial funds towards working capital requirements. In case there are insufficient cash flows to meet its working capital requirement or it is unable to arrange the same from other sources or there are delays in disbursement of arranged funds, or it is unable to procure funds on favorable terms, at a future date, it may result into its inability to finance its working capital needs on a timely basis which may have an adverse effect on its operations, profitability and growth prospects.

The company is coming out with an IPO of 23,25,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 36 per equity share to mobilize Rs 8.37 crore. On performance front, the total revenue from operations for the year ended on FY 2021-22 was Rs 4754.36 lakh as compared to Rs 3871.49 lakh during the FY 2020-21 showing an increase of 22.80%. Moreover, profit after Tax (PAT) increased from loss of Rs 133.24 lakh in the FY 2020-21 to Rs 190.99 lakh in FY 2021-22. Meanwhile, quality of product and timely completion of projects are critical to success in the construction industry. As a result, the company aims to consistently deliver by meeting all relevant specifications and requirements; achieve enhanced customer satisfaction through cost effective and timely completion; develop its in house design and engineering team; and motivate and train its staff for continual improvement of productivity and quality standards.