Blog

SRM Contractors Limited is a construction and development company engaged in the construction of roads, bridges, tunnels, slope stabilization works, and other construction activities mainly in the Union Territories of Jammu and Kashmir and Ladakh. SRM Contractors IPO aims to raise Rs 130.20 crores. The issue is entirely a fresh issue of 0.62 crore shares.

About SRM Contractors:

• Company was incorporated in September 2008.
• They are an engineering construction and development company engaged primarily in the construction of roads (including bridges), tunnels, slope stabilisation works and other miscellaneous civil construction activities in the Union Territories of Jammu & Kashmir and Ladakh.
• They undertake construction works both as an EPC contractor and on an item rate basis for infrastructure projects.
• The Company also undertakes sub-contracting assignments of infrastructure construction projects.
• They have a track record of successful execution of road, tunnel and slope stabilization projects in the difficult terrain of union territories of Jammu & Kashmir and Ladakh
• They have developed the expertise and know-how to undertake infrastructure construction projects in difficult terrains.
• The Company has emerged as a key player in infrastructure construction industry in the Union Territories of Jammu & Kashmir and Ladakh and has developed technical capabilities to execute projects in hilly/ challenging terrain in the region
• As on January 31, 2024, they had 275 full-time employees comprising of skilled and on-site workers engaged in various projects.
• Sanjay Mehta, Ashley Mehta and Puneet Pal Singh are the Promoters of Company

Financials: SRM Contractors IPO

SRM Contractors IPO: Anchors

SRM Contractors raise Rs 39.06 crore from three anchor investors i.e. Neomile Growth Fund, Saint Capital Fund and Astorne Capital VCC

SRM Contractors IPO: Salient Points

• The net proceeds from the fresh issue will be used towards funding capital expenditure requirements for the purchase of equipment/machinery; repayment and/or prepayment of certain outstanding secured borrowings availed by the company; funding the working capital requirements, investment in project specific joint venture projects
• As on December 31, 2023, Company derived its total revenue from operations in the Union Territory of Jammu & Kashmir and Ladakh. However, in January 2024 and February 2024, they have also been awarded with two contracts for slope stabilization work in the state of Uttarakhand and one contract for slope rehabilitation works Arunachal Pradesh and one contract for slope protection work in Himachal Pradesh, respectively.
• They own most of the equipment. As on January 31, 2024, the company owned228 equipment and machineries consisting of 7 hot mix plant, 6 stone crushers, 23 excavators, 18 backhoe loaders, 42 tippers and dumpers, 3 boomers, 3shotcrete machines,7 hot bitumen pressure distributors, 3 wet mix macadam plants, 7 tandem roller compactors, 5 road rollers, 7 pavers, and 4 graders.
• Peers: PE of infra construction companies of similar size quote at PE multiples indicated. RKEC Projects( 16.2 x), Udhayshivakumar Infra ( 13x). while lager players like J Kumar Infraprojects Ltd (15.5x), NCC (22.8x), ITD cementation (24.3x).
• In the recent years, J&K has received a boost in road infrastructure development.
• Company also has a track record of successfully completing large-scale government projects.
• SRM Contractors has completed 37 infrastructure construction projects with a total contract value of Rs 770.88 crore including 31 road construction projects, 3 tunnel projects, 1 slope stabilization project, and 2 other construction works.
• The company has orders worth Rs. 1200 cr. in hand as of December 2023.
• SRM Contractors IPO is coming at a PE ratio of 26x(fy23 earnings) and 17x ( fy24 annualized earnings).
• I intend to apply for SRM Contractors IPO. Many infra players are available at these valuations. What makes it stand apart is its foothold in J&K which is a difficult terrain and has been attracting much attention for development work. On the flip side lead manager Interactive Financial Services has a past record of poor listings.
• It may be noted that Last 5-6 main board IPO listing has been very muted wither flat or at discount even as some were good companies.
• GMP as reported on social media has been Rs. 80.
• Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . I have in the past cleared some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2) Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Do check the data from company’s RHP and exchanges before making any decision. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.