PSP Projects IPO Review

PSP Projects Limited IPO
Ahmedabad-based PSP Projects Limited, a multidisciplinary construction company in India will be launching its IPO on May 17, 2017. PSP Projects Limited provides services across the
construction value chain, ranging from planning & design to construction and post-construction activities to private and public sector enterprises. The nine-year-old Gujarat-based construction company is looking to raise as Rs 212 crore through a mix of offer for sale and fresh issue of equity shares.

Issue Details
PSP Projects Limited
Issue Period  Wednesday, May 17, 2017  to Friday, May 19, 2017
Price Band Rs. 205 – 210
Minimum Bid Lot 70 Equity Shares 
Issue Size  Fresh Issue of 7,200,000 Equity Shares and OFS of 2,880,000 Equity Shares
Issue Size ( Rs.) Rs. 211.68 Crores
Issue Structure :  
QIB 75% of the Net Offer- Rs.158.76 Cr
NIB 15% of the Net Offer Rs.  31.75 Cr
Retail 10% of the Net Offer  Rs.  21.16 Cr
Lead Manager Karvy Investors Services, Motilal Oswal Investment Advisors
Registrar Karvy Computershare Pvt. Ltd.
About PSP Projects Limited
  • Incorporated in 2008, PSP Projects Limited is the Multidisciplinary Construction Company offering a diversified range of Construction and Allied Services across Industrial, Institutional, Government, Government Residential and Residential Projects in mainly across Gujarat.
  • The company has executed 80 projects as of March 31, 2017 and is now bidding for Pan India orders
  • PSP Projects Limited  current orderbook stands at was at Rs. 729.2 crore. The company is looking to raise Rs. 212 crore through fresh offer & Rs. 61 crore through OFS.
  • Post IPO, promoter stake would be 72%
PSP Projects IPO: Financials:

Brief Financials ( Rs.  In Crores)
  9M FY17 2016 2015 2014 2013
Net Revenue from Operations 239.11 457.98 280.46 210.42 257.25
Revenue Growth (%) 63.30% 33.29% -18.20%
EBITDA as stated 32.45 39.35 22.41 16.74 21.98
EBITDA Margin (%) 13.57% 8.59% 7.99% 7.96% 8.54%
Profit Before Tax 31.75 38.6 21.26 15.41 18.19
Net Profit  21.48 24.93 14.05 10.07 12.25
Net Profit  Margin 8.98% 5.44% 5.01% 4.79% 4.76%
Share Capital 28.8 3.2 0.8 0.8 0.8
Face Value 10        
Reserves 58.78 62.89 46.12 33.99 25.8
Net worth 87.58 66.09 46.92 34.79 26.6
RoNW (%) 24.53%^ 37.72% 29.95% 28.94% 46.06%
NAV Per Equity share (Rs.) 30.41 22.95 16.29 12.08 9.23
EPS (Rs.)  7.46 8.66 4.88 3.5 4.25
EPS Annualized 9.95        
IPO Price 210.00        
PE ratio 21.11
P/BV ratio 6.91
  • Reasonable track record of project execution in the construction sector whose outlook is good and now expanding geographical reach from Gujarat to other areas.
  • PSP Projects Limited P/BV multiple annualized 9MFY17 is around 7 which is to be at premium its peers like  Ahluwalia Contracts 5.2x, Nila Infra. 3.3x and JMC projects 1.4. However PE ratio of PSP Projects Limited at 21 compares favorably to its peers like Man Infra 31.2,  RPP Infra (25.47), Nila Infra (33.93) 
  • PSP Projects Limited has good orders in hand fo the tune of Rs. 700 crore plus. As of 31st Mar. 2017, the subsidiaries and Joint Ventures total order book was Rs. 90 crore and Rs. 1,07 crore  respectively.Among prestigious orders Its subsidiary, PSP Projects and Proactive Constructions Pvt. Ltd., has been awarded a project that involves the development of structure work for a project located at Gift City, Gandhinagar, Gujarat, of  Rs. 1,60 crore. its Joint Venture, i.e. GDCL & PSP Joint Venture, has been awarded a project for the  construction of metro train depot cum workshop at Gyaspur on the North-South Corridor of the Ahmedabad Metro Rail Project Phase-1,valued at  Rs. 134 crores.
  • PSP Projects Ltd. was also one of the developers involved in building the now famous Sabarmati Riverfront.
  • PSP Projects Limited experience is mainly concentrated in Gujarat till date.
  • The issue is commanding about Rs. 40-45/- in Grey market though such rates may not be sustainable.
  • The PSP Projects IPO issue being below Rs. 2,50 crore threshold, the share will trade in trade for trade (TFT) segment for  initial 10 days period,  post listing. 
  • Based on above issue looks just average and while it is  not totally out of comfort zone, management is not tested and corporate governance issues like high salary of MD have been pointed out. 
  • At this stage I may apply only moderately for the PSP Projects  IPO primarily based on its good execution track record and on the assumption that downside is limited even as doubts lurk about corporate governance issues. 
  • Overall there could be  better opportunities available in primary and secondary market and issue should be approached with caution. Also issues like S chand which got good subscription have taken a heavy beating in the market subsequently. 

Leave a Reply