The initial public offering (IPO) of IRCON International opened for subscription on Monday at a price band of Rs 470-475 per equity share. The public sector integrated engineering and construction company under the ministry of railways specialises in big-ticket infrastructure project, including railways, highways, bridges, flyovers, tunnels, etc. The shares are estimated to fetch over Rs 470 crore at the higher price band of Rs 475.

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IPO details and book manager:

The public issue comprises an offer for sale of 99,05,157 equity shares. A discount of Rs 10 per share on the offer price will be offered to retail investors and eligible employees.

The IPO will close on September 19 and the issue size is Rs 470 crore. The stock will be listed on both indexes - BSE and NSE.

IDBI Capital Markets and Securities, Axis Capital, SBI Capital Markets are the book running lead managers to the issue.

Promoters: The President of India acting through the ministry of railways, holds 99.71 percent of the pre-offer paid-up euqity share capital of the company. Post-offer, the equity will come down to 89.18 percent.

Senior Management: Sunil Kumar Chaudhary is currently the chairman and managing director of the company, while Deepak Sabhlok head as director-projects. Mukesh Kumar Singh is CFO and director - finance.

Brokerage view

Antique stock broking: In its research report, the firm recommends "subscribe," given the company's order backlog running into Rs 224 billion. It notes that IRCON is undertaking 33 railway projects in two countries internationally and in 13 state nationally.

The significant risk, however, is it garners the lion's shares (87 percent) of its order book from the railways. The governemnt can unilaterally change the terms and conditions in nominated contract and the scope of order inflow to order conversion is dependent on state-contingent conditions.

Axis Capital: The firm points at following strengths that make the IPO attractive:

Competitive strength such as construction bussines operating in diverse sectors covering many countries.

Excellent execution track record through strong operating systems and controls.

Strong financial performance and credit profile.

Robust order book and steady execution.

Qualified and experienced management team.

GEPL Capital: The company's revenue is dependent completely on the infrastructure projects mainly from the government and any change in the government policies, restructuring of the existing projects or delay in the payments may affect the significant amount of the revenue of the company.

SPA: Recommending to "subscribe," with a long-term perspective, the financial advisory firm lists its raison d'etre as diversified business across many countries, excellent execution track record, robust order book, experienced management, strong financials and credit profile.

The risks, as several others points, are the dependency on government projects, the portfolio comprising of large-scale and long-term projects in the railway sector, the deputation of employees from the railways and risks emanating from sub-contracted projects.

Nirmal Bang: Among positive factors, the firm views a favourable and improving investment climate in railways and roads coupled with a robust order book that provides long-term growth visibility. Railways nomination, focus on high-value projects and a healthy balance sheet are other major advantages.

The concerns emanate from a shift in focus from infrastructure investments by future government, margin cap or a cap on profitability ratios if introduced and implemented by the government could impact future financials.

Increase in competition in railways and roads can adversely affect the company's ability to sustain its order book and margins.

Sharekhan: Apart from similar looking positives and risks as pointed by others above, the brokerage points exchange fluctuation risks as an added concern as IRCON has diversified its operations into new geographies such as Sri Lanka, Bangladesh, Malaysia, Ethiopia and Mozambique.

First Published:Sept 17, 2018 8:21 PM IST