VVIP Infratech coming with IPO to raise Rs 61.21 crore

VVIP Infratech

• VVIP Infratech is coming out with initial public offering (IPO) of 65,82,000 shares in a price band Rs 91-93 per equity share.
• The issue will open on July 23, 2024 and will close on July 25, 2024.
• The shares will be listed on BSE SME Platform.
• The face value of the share is Rs 10 and is priced 9.10 times of its face value on the lower side and 9.30 times on the higher side.
• Book running lead manager to the issue is Share India Capital Services.
• Compliance Officer for the issue is Kanchan Aggarwal.

Profile of the company

The company is an infrastructure company in India. It is Class ‘A’ Civil and Electrical contractor having decades of experience in the field of execution and construction of infrastructure projects such as Sewer, Sewer Treatment Plants, Water Tanks, Water Treatment Plants, Sector Development work, Electrical Distribution and Sub Stations upto 33 kVA, Jal Jeewan Mission work etc. The company emphasis on quality work, on-time delivery, and competitive pricing. It has a team of experienced and qualified engineers and technicians who are committed to provide best possible services to its clients. It is primarily working on projects in the state of Uttar Pradesh, Uttarakhand, NCR Delhi and other northern Part of India. 

The company is a rapidly growing company with a strong focus on innovation and quality. It is well-positioned to play key role in the development of India's infrastructure sector, particularly in the area of STPs. Currently, the company has an order book of Rs 477.62 crore, including an Operation and Maintenance (O&M) order book of Rs 126.19 crore as on January 31, 2024. The company has submitted bids for Rs 182.00 crore against tenders in Roorkee, Uttarakhand which is under process to be opened. 

Primarily serving regions like Uttar Pradesh, Uttarakhand, NCT of Delhi, and northern India, the company has cemented its position as a preferred choice in sewer treatment projects. Embracing automation and modern techniques, VVIP has successfully delivered numerous key infrastructure projects, gaining a robust reputation for its execution prowess. Committed to continuous growth, the company aims for the pinnacle of engineering excellence, efficiency, and economy.

Proceed is being used for:

• Capital expenditure 
• Working capital requirement 
• General corporate purpose 
• Issue expense

Industry Overview

India’s high growth imperative in 2023 and beyond will significantly be driven by major strides in key sectors with infrastructure development being a critical force aiding the progress. Infrastructure is a key enabler in helping India become a $26 trillion economy. The India Water and Wastewater Treatment Technologies Market size is expected to grow from $0.92 billion in 2023 to $1.54 billion by 2028, at a CAGR of 10.78% during the forecast period (2023-2028). India has the second largest road network in the world, spanning about 63.73 lakh kilometres, which includes national highways, state highways, district roads, and rural roads. This extensive network ensures connectivity across various regions of the country.

The market for sewage and wastewater treatment in India is still evolving. About 50-60 per cent of the wastewater generated in the country gets treated. The government has launched various programmes such as the Atal Mission for Rejuvenation and Urban Transformation (AMRUT), Namami Gange, and Smart Cities Mission with a focus on enhancing the sewage/wastewater treatment infrastructure. Many new projects are being undertaken to increase sewerage capacity. The repair and rehabilitation of STPs is emerging as a notable trend, resulting in the extension of life of treatment plant infrastructure. Under the Namami Gange programme, the government has taken up more than 170 sewage infrastructure projects for the creation and rehabilitation of around 5,300 mld of STP capacity and the laying of over 5,200 km of sewerage network. So far, more than 50 per cent of these projects have been completed.

There is also a growing focus on technology solutions and new-age equipment for effective treatment of sewage/wastewater. Advanced solutions such as SCADA, IoT, GIS systems, satellite surveillance and remote sensors are being deployed for monitoring, collection and treatment systems. Many city corporations are making increased use of these digital and technology solutions to optimise and improve the wastewater treatment network in their respective cities.

Pros and strengths

Strong order book of projects: The company has Outstanding orders as on January 31, 2024 as of Rs 47762 lakh containing work related to Implementation of Various rural water supply projects including O&M for 10 years in the district of Rampur and Farrukhabad Uttar Pradesh under Jal Jeevan Mission under State Water & Sanitation Mission, Implementation of Various rural water supply projects of 50 Nos. of Gram Panchayats in the district of Kasganj under Jal Jeevan Mission and Supply, Laying & Jointing of Sewer line and appurtenant works, construction of additional sump well, Screen Chamber, Inlet Chamber & construction of sewer house connecting chambers & sewer house connection work in Zone-I (Masani) Mathura Uttar Pradesh etc.

Strong high-quality work, on-time delivery, and competitive pricing: The company being the top preferred companies in India in Sewer Treatment Plants and is amongst one of the companies that constructed two 56 MLD STP plant on SBL (Sequential Batch Reactor) technology in the year 2013. Being already constructed the above STP’s the capability of the company made it eligible for bidding for single tender of up to 90 MLD Sewer Treatment plants projects which are ideal for urban city needs and cover almost 75% of STP Sizes in Indian cities.

Experienced and qualified engineers and technicians: The company has worked upon the developmental works for agencies like Ghaziabad Development Authority, Noida Authority and has developed various sectors with respect to the facilities like sewerage work, drainage works, internal road works and electrical distribution works. The company offers complete solution for development of urban pockets/sectors for various authorities/agencies.

Risks and concerns

Business is working capital intensive: Its working capital requirements for Financial Year 2025 are estimated at Rs 4000 lakh. An amount of Rs 4000 lakh in Financial Year 2025 towards working capital requirements will be funded out of the Issue Proceeds, whereas the balance, if any, would be arranged from its internal accruals and/or loan funds. Its anticipated growth and expansion, if realized, could necessitate an increase in its current assets. However, its inability to secure and maintain sufficient cash flow, credit facilities, and other financing sources in a timely or consistent manner could adversely impact its financial health and operational performance.

Depend on top ten suppliers:  As per standalone restated financial statements, its top ten suppliers contributed 44%, 27.23%, 53.43% and 41.94% of its purchases for the periods September 30, 2023, March 31, 2023, March 31, 2022, and March 31, 2021, respectively. However, supplier composition and revenue generation are subject to change based on ongoing demand fluctuations and its acquisition of new clients. While it maintains good long-term relationships with these clients, their continued patronage cannot be assured. Consequently, it cannot guarantees the timely or complete payment of receivables from them. Failure to fulfill their obligations by any significant customer would adversely impact its business, financial condition, and operating results.

Delays or defaults in payment by customer: Its business model exposes it to the risk of customer payment delays or defaults. Its financial position and performance are heavily reliant on the creditworthiness of its customers. As it supplies its products directly to customers without requiring advance payments or security deposits, payment delays may necessitate increased working capital investments. It cannot guarantee the timely receipt of payments from all customers, or the full amount owed. If a customer defaults on a significant order, or if such an order is delayed, canceled, or fails to materialize, it could have a material adverse impact on its financial condition and operating results.

Outlook

VVIP Infratech is an infrastructure company in India. It is Class ‘A’ Civil and Electrical contractor having decades of experience in the field of execution and construction of infrastructure projects such as Sewer, Sewer Treatment Plants, Water Tanks, Water Treatment Plants, Sector Development work, Electrical Distribution and Sub Stations upto 33 kVA, Jal Jeewan Mission work etc.  On the concern side, the company provides construction work of its projects on contractual basis and is performed by labour provided by third party labour contractors. The timely and quality construction of its projects depends on availability and skill of such laborers, as well as contingencies affecting them, including labour shortages. Though in many projects which it undertakes as sub- contractors the supply of contract labour is the responsibility of the primary contractor, its operations and timelines may be affected by any shortage, delay or incompetence of the contract labour force.

The company is coming out with a maiden IPO of 65,82,000 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 91-93 per equity share. The aggregate size of the offer is around Rs 59.90 crore to Rs 61.21 crore based on lower and upper price band respectively. On performance front, total income for the financial year 2023-24 stood at Rs 21,655.92 lakh whereas in Financial Year 2022-23 the same stood at Rs 14,817.45 lakh representing a significant increase of 46.15%. The company’s profit after tax (PAT) stood at Rs 1778.16 lakh in the financial year 2023-24 as compared to Rs 934.31 lakh in the Financial Year 2022-23. Meanwhile, it is primarily working on projects in the state of Uttar Pradesh, Uttarakhand, NCR Delhi and other northern Part of India. The company is a rapidly growing company with a strong focus on innovation and quality. It is well-positioned to play key role in the development of India's infrastructure sector, particularly in the area of STPs. Going forward, the company has submitted bids for Rs 182.00 crore against tenders in Roorkee, Uttarakhand which is under process to be opened. This is a significant increase in the company's order book value, which is a positive sign for the company's growth prospects. It is also a testament to the company's strong execution capabilities and its ability to win new projects.