June 27, 2023
The motherboard IPO market is back with a bang.
So far in 2023, SME IPO activity has been plentiful, but motherboard IPO activity has been quite slow. Only seven motherboard IPO offerings went live in the first five months of 2023. So the average wasn’t even two a month.
But this week, the scenario changed abruptly.
Three motherboard companies are going online with their public offerings this week. Two out of three IPOs, Cyient DLM IPO and IdeaForge IPO, went live as early as June 26, 2023.
Real estate company PKH Ventures’ third IPO will go live this Friday, June 30, 2023.
Let’s take a look at the key details of the IPO.
Issue period: June 30, 2023 to July 04, 2023
Type of output: New issue valued at Rs. 2,702.2 million (RM) and Offer for Sale (OFS) valued at Rs. 1,091.3 million
Price range: 140 to 148 rupees per share
face value: 5 rupees per share
lot size: 100 shares
Application limit: At least one property and a maximum of thirteen properties for private investors
The Company has reserved at least 50% interest in the offering for qualified institutional buyers (QIB). At least 15% is reserved for non-institutional buyers (HNI). Thus, no more than 35% of the shares are available for private private investors.
Provisional IPO grant date: July 07, 2023
Provisional listing date: July 12, 2023
#1 About the company
Founded in 2000, PKH Ventures is engaged in construction and development, hospitality and management services.
PKH Ventures performs civil engineering works for third-party developer projects. The civil engineering business is carried out by its subsidiary and construction division, Garuda Construction.
PKH Ventures Hospitality Vertical is engaged in owning, managing and operating hotels, restaurants, quick service restaurants, spas and grocery sales.
The Company currently offers various Mechanical, Electrical and Plumbing (MEP) services such as annual maintenance of its projects and certain third party O&M contracts.
The Company receives two government projects namely the Hydroelectric Project and the Nagpur Project, which are carried out through its subsidiaries and special purpose vehicles.
#2 A look at the finances
PKH Venture’s revenue fell 7.3% yoy to Rs 2,454.1 million in FY2022 due to lower order intake in the year under review.
The company managed to significantly reduce its expenses in the year under review, which is clearly reflected in the profits made.
As a result, the company reported a 29% year-on-year increase in net profit to Rs.664.2 million.
PKH Ventures Financial Snapshot (2020-22)
| details | 03/31/22 | 03/31/21 | 03/31/20 |
|---|---|---|---|
| Revenue (Rs in mil) | 2,454.10 | 2,646.60 | 1,690.00 |
| Revenue growth (%) | -7.30% | 56.60% | |
| net profit | 664.2 | 516.3 | 141 |
| Net Profit Margin (%) | 27.1 | 19.5 | 8.3 |
| net worth | 7,598.30 | 6,934.50 | 1,497.30 |
| Return on Net Assets (%) | 36.6 | 42.6 | 57.8 |
| Basic Earnings Per Share (Rs) | 6.3 | 5.1 | 2.4 |
Data Source: Company’s Red Herring Prospectus (RHP).
#3 Peer Comparison
The company is involved in a wide range of business activities.
According to the company, there are no public companies operating such a diversified business as PKH Ventures in India. Accordingly, a peer comparison of the key performance indicators of the entire company is not possible.
However, it is possible to compare each of the company’s divisions with key economic players in each industry.
Let’s take a look at PKH Ventures’ peer comparison in two different business segments.
Peer Comparison of Construction Segment (FY 2022)
| Pursue | Order Backlog (Rs Million) | Order book for sale (Times) | Income from construction (Rs in mil.) |
|---|---|---|---|
| PKH Ventures | 5,597.5* | 6.0* | 930.4 |
| Larsen & Toubro | 35.75.950.00 | 3.6 | 10.06.040.90 |
| NCC | 3,93,610.00 | 3.5 | 1.11.379.60 |
| Alhuwalia Contracts | 1,30,336.00 | 4.9 | 26,677.20 |
| Hindustan Construction Company | 1,59,670.00 | 1.6 | 1.02.048.20 |
Data Source: Company’s Red Herring Prospectus (RHP).
*Construction and Development segment revenue and order backlog as of March 10, 2022
Hospitality Segment Peer Comparison (FY2022)
Source: Equitymaster
#4 Arguments in favor of the company
- The company has a 15-year track record in the construction and hospitality segments.
- The company has a strong and growing order book. It continues to receive contracts from third parties, government projects, government hotel development projects and upcoming development projects.
- It has a diverse business model. A diversified business model effectively reduces a company’s exposure to a recessionary environment in a particular industry in which it operates.
- It has an asset-light civil construction business model. The company relies mainly on third-party suppliers for equipment and manpower.
#5 Risk Factors
- The company has had negative cash flows in the past and may continue to do so in the future. The same may adversely affect its cash flow requirements, which in turn may adversely affect its ability to operate its business and implement its growth plans, and therefore its ability to continue as a going concern.
- The company is developing a hydroelectric power plant for the first time. In the event of failure of said facility to operate or lack of sufficient power generation, its operating results and financial condition may be adversely affected.
- Failure by the Company to obtain the necessary permits to construct the hydroelectric project for which it currently has pending applications may impact the hydroelectric project’s completion schedule.
- A significant portion of the revenue from construction and development activity comes from the Government of India through the Delhi Police. Any dispute with the Delhi Police that results in the delay or suspension of pension payments can have a significant negative impact on the company’s financial condition.
Conclude
Increasing income and employment opportunities have led to a migration to urban areas, thus creating a greater need for real estate in India’s major cities. The Indian real estate sector will therefore boom due to the increasing demand.
The real estate segment has also received a massive boost from government initiatives such as the Affordable Housing Scheme, the Goods and Services Tax (GST) and the Real Estate Regulation and Development Act, 2016 (RERA).
While the first few months following the implementation of these initiatives resulted in some disruption, the guidelines increased the transparency and competence of the sector.
This boosted the confidence of domestic and foreign investors in the real estate industry, which led to higher foreign direct investments in this sector.
Strong demand coupled with government initiatives could therefore provide the company with a great deal of momentum.
However, like any other investment opportunity, PKH Ventures has both advantages and disadvantages. It remains to be seen how the company’s shares will fare in the market.
Stay tuned for more updates on this IPO and any upcoming IPOs in the market.
Have fun investing!
Investing in the securities market is subject to market risk. Read all related documents carefully before investing
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FAQs
What are the best performing IPO stocks in India right now?
According to Equitymaster’s Stock Screener, these are the best-performing IPO stocks right now –
These companies have been ranked according to the profits they have made to investors since their listing.
Keep in mind that identifying future multibagger stocks isn’t easy, but if you do it carefully and with due diligence, you can find high-growth companies that can become future multibaggers.
How should you invest in the best performing IPO stocks in India right now?
The most successful IPOs have already achieved above-average returns. So there’s a good chance these stocks are overvalued.
Before investing your hard-earned money, be sure to check the reviews first. It is equally important to study the business. You should only invest in fundamentally strong stocks with good prospects.
What is GMP?
GMP stands for Gray Market Premium. This is the amount in excess of the issue price that traders are willing to pay or charge to trade IPO shares. The GMP can tell you how an IPO will perform on the trading day.
If you’re applying for an IPO, take a look at what might happen on listing day. However, remember that GMP should not be the only factor influencing your decision to hold or exit the stock.
If you are an investor, you should approach GMP with caution. A factor as volatile as GMP cannot be a determining factor.
This is why you should never apply for an IPO just because it requires a good GMP. You should apply for an IPO because you believe in the company’s profitability. Therefore, more weight should be given to the fundamentals of the company.
What is an IPO price band?
The IPO price band is the price range within which investors can bid for the shares. The minimum price is called the minimum price and the maximum price is called the maximum price.
If the company changes the price range, the offer period will be extended by at least three additional business days.
Any change in the price range and, if applicable, the changed offer period will be announced by means of a press release to the stock exchanges and on the websites of the book-running underwriters.
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