IPO Note | Realty
Sep 12, 2017
Capacit'e Infra Projects
SUBSCRIBE
sue Open: Sep 13, 2017
Is
Capacit'e for towering growth
Issue Close: Sep 15, 2017
Capacit'e Infra Projects Ltd (CIL) is a fast growing construction company in India.
Residential constitutes more than 90% of the company’s `4,602cr order book. It
Issue Details
caters to established realtors such as Kalpataru, Wadhwa group, Oberoi
Construction ltd, Lodha, Rustomjee and Godrej properties.
Face Value: `10
Large order book with marquee client base provides revenue visibility: CIL’s
Present Eq. Paid up Capital: `43.6cr
current order book stands at `4,602cr (`4,146cr from residential segment,
`442cr from commercial segment and remaining from institutional). This gives
Offer for Sale: **1.60cr Shares
CIL a revenue visibility for the next 4 years. It order book mainly consists of high
Fresh issue: `400cr
rise buildings (50% order book comprises of high rise buildings).
Focused approach to strengthen position: CIL was incorporated in August 2012,
Post Eq. Paid up Capital: `59.6cr
and despite being a young player, the company has been able to grow its
revenue from a scratch to
`1,157cr within
4 years, largely owing to
Issue size (amount): *`392cr -**400 cr
management’s focused approach on the residential space (high rise) and
presence in top 7 cities. This segment has less competition and lately there has
Price Band: `245-250
been a dearth of delivery focused contractors mainly owing to leveraged position.
Lot Size: 60 shares and in multiple
This led CIL to report above average EBITDA margin of 13.7% and RoCE of 33%
thereafter
in FY2017.
Post-issue implied mkt. cap: *`1,663cr -
Expansion into cities to thrust revenue growth: Post implementation of RERA (Real
**`1697cr
Estate Regulatory Authority), a contractor who delivers on time would get large
Promoters holding Pre-Issue: 57%
chunk of orders. Hence, CIL’s decision to expand in cities with high growth
Promoters holding Post-Issue: 44%
prospects would further assist revenue growth. Moreover, the company is
experienced in executing large projects, which would help it to bid for mass
*Calculated on lower price band
housing project by Government (Housing for all by 2022).
** Calculated on upper price band
Track record of healthy financial performance: CIL has reported revenue CAGR of
~74% over FY2014-17. On the bottom-line front, the company has reported
Book Building
CAGR of ~157% over FY2014-17. Return on equity has also improved 536bps
QIBs
50% of issue
over FY2014-17.
Non-Institutional
15% of issue
Outlook & Valuation: Considering, CIL’s experienced management, revenue
visibility, strong track record of timely delivery of projects and strong relationships,
Retail
35% of issue
we believe that CIL would continue to gain incremental order inflow going ahead.
At the upper end of the price band, the pre-issue P/E works out to be 18.6x
Post Issue Shareholding Pattern
FY2017 earnings, which is lower compared to P/E multiple of its peers i.e.
Ahluwalia - 22x, PSP 32x. Moreover, post RERA, a contractor with strong track
Promoters
44%
record of timely project delivery would garner major order. Hence, owing to all
Others
56%
the positive factors, healthy return ratios we rate this IPO as “SUBSCRIBE”.
Key Financials
Y/E March (` cr)
FY14
FY15
FY16
FY17
Net Sales
214
556
853
1,157
% chg
1,105
159
54
36
Net Profit
4
32
49
70
% chg
(213)
679
52
43
EBITDA (%)
7
11
13
14
EPS (Rs)
1
6
9
13
P/E (x)
316
40
27
19
P/BV (x)
56
22
8
4
RoE (%)
18
55
28
23
Jaikishan J Parmar
RoCE (%)
11
33
30
33
EV/EBITDA
90
21
12
9
+022 39357600, Extn: 6810
EV/Sales
6
2
2
1
[email protected]
Source: RHP, Angel Research; Note: Valuation ratios based on pre-issue outstanding shares and at upper end of the price band
Please refer to important disclosures at the end of this report
1
Capacit'e Infra Projects Limited | IPO Note
Company background
Capacit'e Infra Projects provides end-to-end construction services for residential
buildings (“Residential”), multi-level car parks, corporate office buildings and
buildings for commercial purposes (collectively, “Commercial”) and buildings for
educational, hospitality and healthcare purposes (“Institutional”). The company’s
capabilities include constructing concrete building structures as well as composite
steel structures and also provide mechanical, electrical and plumbing (“MEP”) and
finishing works.
Furthermore, CIL believes in owning equipment that is required throughout the
lifetime of a project, i.e. formwork, tower cranes, passenger and material hoists,
concrete pumps and boom placers (collectively, “Core Assets”), as this allows
company to have timely access to key equipment required the business.
Accordingly, as at March 31, 2017, it had a consolidated net block of fixed assets
(including capital work in progress) amounting to ₹261cr, including ₹214cr of
Core Assets, constituting 81.78% of net block of fixed assets (including capital
work in progress).
CIL is the fast growing construction company focused on Residential, Commercial
and Institutional buildings, with growth in consolidated revenue from operations
from ₹ 214cr for Fiscal 2014 to ₹ 11,57cr for Fiscal 2017, and an Order Book of
₹ 4,603cr as at May 2017 comprising 56 ongoing projects.
The company has been working for a number of reputed clients and is associated
with some marquee construction projects in India.
Exhibit 1: Order Book Split
Exhibit 2: 56 Ongoing projects
Type Of Project
% of Revenue
Type of Project
No of projects
Gated Community
48.3
Super High rise Buildings
12
High Rise
33.7
High Rise Buildings
23
Super High Rise
16.8
Other Buildings
6
Other Buildings
1.17
Gated Communities
14
Villament
0.03
Villament
1
Source: Company, Angel Research
Source: Company, Angel Research
Sep 12, 2017
2
Capacit'e Infra Projects Limited | IPO Note
Issue Details
The company is raising `400cr through a fresh issue of equity shares in the price
band of `240-250. The fresh issue will constitute ~23.6% of the post-issue paid-
up equity share capital of the company, assuming the issue is subscribed at the
upper end of the price band.
Exhibit 3: Pre and Post-IPO shareholding pattern
No. of shares (Pre-issue)
(%)
No. of shares (Post-issue)
(%)
Promoter
2,97,28,846
57.3
2,97,28,846
43.8
Investor
2,21,62,651
42.7
3,81,62,651
56.2
5,18,91,497
6,78,91,497
Source: Company, Angel Research
The objects of the offer
`250cr would be used for Funding working capital requirements
`52cr for Funding purchase of capital assets (system formwork)
Remaining IPO proceeds would be used for General corporate purposes
Key Management Personnel
Mr. Deepak Mitra is the Chairman and independent Director and has been
associated with the company since February 25, 2015. He has a bachelors’
degree in civil engineering from the Calcutta University. He has approximately 56
years of experience. Prior to joining CIL, he was on the board of directors of Petron
Civil Engineering Private Limited for over 26 years.
Mr. Rahul R. Katyal is the Managing Director and has been associated with the
company since incorporation. He holds a higher secondary certificate from the
Maharashtra State Board. He has approximately 23 years of experience. Prior to
incorporating the company, he had been on the board of directors of CSL and key
managerial personnel at Pratibha Industries Limited till 2012. He is currently
focused on business development and operations of our Company.
Mr. Rohit R. Katyal is the Executive Director and is also currently the Chief Financial
Officer of Company. He has been associated with the company on a continuous
basis since March 1, 2014. He holds a bachelors’ degree in commerce and has
approximately 25 years of experience. Prior to joining CIL, he had been on the
board of directors of Pratibha Industries Limited till 2012 and CSL till 2014, where
he was on the board of directors for about 16 years.
Sep 12, 2017
3
Capacit'e Infra Projects Limited | IPO Note
Investment Rationale
Large order book with marquee client base provides revenue visibility: CIL’s
current order book stands at`4,602cr (`4,146cr from residential segment, `442cr
from commercial segment and remaining from institutional). This gives CIL, a
revenue visibility for the next 4 years. Its order book mainly consists of high rise
buildings (50% order book comprises of high rise buildings).
CIL’s quality of work and timely execution has allowed it to enhance and
strengthen relationships with existing clients and to secure projects from new
clients. For example, it has secured repeat orders from some of the clients, namely
Lodha Group, Wadhwa Group, Godrej Properties Limited, Transcon Developers
Private Limited, Ahuja Constructions and Puravankara Projects Limited, since the
date of first contract with each of them.
Exhibit 4: Key Projects
Client
Project
Location
Type
RESIDENTIAL PROJECTS
Kalpataru
Kalpataru Immensa
Thane, MMR
Gated Community
Oberoi Constructions
Enigma
Mulund, MMR
Super High Rise
T Bhimjyani Reality
Neelkanth Woods - Phases I & II
Thane, MMR
Gated Communities
Saifee Burhani Upliftment
Saifee Burhani Upliftment Project - Sub cluster 03
Bhendi Bazaar, MMR
High Rise
Prestige Estates
Prestige Hillside Gateway
Kochi
Gated Community
Rustomjee
Rustomjee Seasons
BKC, MMR
Gated Community
Godrej Properties
Godrej Central
Chembur, MMR
Gated Community
The Wadhwa Group
H Mill
Prabhadevi, MMR
Super High Rise
Puravankara Projects
Purva EVOQ
Chennai
Gated Community
Lodha Group
The Park - Towers 3 and 4
Worli, MMR
Super High Rise
Godrej Properties
Godrej Summit, Phase II
Gurugram, NCR
Gated Community
COMMERCIAL PROJECTS
Bharti Land
Worldmark
Gurugram, NCR
High Rise
Ozone Group
Urbana Hyatt Palace
Bengaluru
Other Buildings
INSTITUTIONAL PROJECT
Sri Gangaram Hospital
Multi-level Car Parking
New Delhi, NCR
Other Buildings
Source: Company, Angel Research
Exhibit 5: Zone wise Oder book
Exhibit 6: Order Book Split
Geography
% of Order Book
Type Of Project
% of Revenue
South zone
22.8
Gated Community
48.3
North Zone
6.3
High Rise
33.7
West Zone
70.8
Super High Rise
16.8
Source: Company, Angel Research
Other Buildings
1.17
Villament
0.03
Source: Company, Angel Research
Sep 12, 2017
4
Capacit'e Infra Projects Limited | IPO Note
Focused approach to strengthen position: CIL was incorporated in August 2012,
and despite being a young player, the company has been able to grow its revenue
from a scratch to `1,157cr within 4 years, largely owing to management’s focused
approach on the residential space (high rise) and presence in top 7 cities. This
segment has less competition and lately there has been a dearth of delivery
focused contractors mainly owing to leveraged position. This led CIL to report
above average EBITDA margin of 13.7% and RoCE of 33% in FY2017.
Exhibit 7: Growth Strategies
Continue to remain focused on building construction
Expand in the mass housing segment
Increase focus on & execute greater number of projects on a lock-and-key basis
Undertake projects on a design - build basis
Bid for, and undertake, projects in the public sector
Capitalise on changes on account of the implementation of the RERD Act
Expand presence in cities with high growth potential
Source: Company, Angel Research
Expansion into cities to thrust revenue growth: Post implementation of RERA (Real
Estate Regulatory Authority), a contractor who delivers on time would get large
chunk of orders. Hence, CIL’s decision to expand in cities with high growth
prospects would further assist revenue growth. Moreover, the company is
experienced in executing large projects, which would help it to bid for mass
housing project by Government (Housing for all by 2022).
CIL’s client base, consisting of some of India’s leading real estate developers,
allows the company to bid for and secure a broad range of projects. Further, we
believe that the company’s ongoing execution of certain redevelopment projects,
such as the Saifee Burhani Upliftment Project - Sub cluster 03 and Rustomjee
Seasons, will allow it to qualify for and to bid for mass housing projects in the
future. We believe that the consistent growth in CIL’s Order Book position is a
result of the company’s sustained focus on building projects and ability to
successfully bid and win new projects.
Sep 12, 2017
5
Capacit'e Infra Projects Limited | IPO Note
Track record of healthy financial performance: CIL has reported revenue CAGR of
~74% over FY2014-17 largely on the back of - (a) Promoters are experienced in
the construction business, they come with hefty experience with Pratibha Industry,
which is involved in the similar business. This has helped them to deliver projects
on time, and (b) Focused approach in the residential space in top cities, which
helps them to expand. On the bottom-line front, the company has reported CAGR
of ~157% over FY2014-17. Return on equity has also improved 536bps over
FY2014-17.
Exhibit 8: Healthy Return ratio
Exhibit 9: Revenue Trend (` in cr)
80
1,400
55
60
1,200
33
33
40
30
28
1,000
23
18
20
11
800
-
600
FY13
FY14
FY15
FY16
FY17
-20
400
-18
-40
200
214
214
556
853
-60
-51
-
RoCe RoE
FY14
FY15
FY16
FY17
Source: Company, Angel Research
Source: Company, Angel Research
Exhibit 10: Comparative Analysis
ROCE (%)
EBITDA (%)
FY13
FY14
FY15
FY16
FY17
FY13
FY14
FY15
FY16
FY17
Capacit’e
-18
11
33
30
33
-17
7
11
13
14
Ahluwalia Contracts
-16
5
19
25
25
-2
4
11
13
12
JMC
4
4
6
8
9
4
5
8
10
11
Simplex
8
9
9
10
11
8
9
9
12
13
PSP
32
30
16
25
33
9
8
8
7
15
RoE (%)
D/E
Capacit’e
-50.6
17.7
55.0
28.2
23.1
1.4
3.6
1.8
0.9
0.4
Ahluwalia Contracts
-45.2
-1.2
19.0
20.0
16.9
1.2
1.0
0.5
0.3
0.2
JMC
2.1
-2.4
-5.8
-12.5
-8.7
2.1
3.2
4.5
3.0
3.1
Simplex
4.1
4.1
3.9
7.5
8.8
2.1
2.0
2.2
2.4
2.1
PSP
46.1
28.9
30.0
34.4
39.3
0.5
0.7
0.7
0.7
0.7
Source: Company, Angel Research
Sep 12, 2017
6
Capacit'e Infra Projects Limited | IPO Note
Exhibit 11: Comparative Growth rate of related companies
Growth (%)
Over FY13-17
Revenue
PAT
Capacit’e
74.5
157
Ahluwalia Contracts
14.2
-
JMC
-2.4
-
Simplex
0.5
31
PSP
31
60
Source: Company, Angel Research
Exhibit 12: Working Capital (Days) of related companies
FY12
FY13
FY14
FY15
FY16
FY17
Capacit’e
23.1
74.6
57.1
80.0
86.2
Ahluwalia Contracts
86.1
73.1
109.0
108.3
119.7
92.8
JMC
19.4
-20.0
-9.8
7.6
19.1
14.1
Simplex
58.7
90.2
83.5
82.8
31.0
36.7
PSP
-40.0
-8.8
Source: Company, Angel Research
Outlook & Valuation
Considering, CIL’s experienced management, revenue visibility, strong track record
of timely delivery of projects and strong relationships, we believe that CIL would
continue to gain incremental order inflow going ahead. At the upper end of the
price band, the pre-issue P/E works out to be 18.6x FY2017 earnings, which is
lower compared to P/E multiple of its peers i.e. Ahluwalia - 22x, PSP 32x.
Moreover, post RERA, a contractor with strong track record of timely project
delivery would garner major order. Hence, owing to all the positive factors, healthy
return ratios we rate this IPO as “SUBSCRIBE”.
Key risk
Client concentration
Projects awarded from certain clients contribute a significant portion of the
company’s Order Book. As on May 31, 2017, projects awarded by the top five
clients, based represented 38.73% of the Order Book.
Short history of financials
The Company was incorporated on August 9, 2012. So, all the financial analysis is
done for only 4 years. This is a very less period to judge accounting quality of the
any company.
Slowdown in residential market
CIL is generating 80-90% of the revenue from building residential towers and
Villas. Hence, any slowdown in real-estate market would adversely impact the
financials of the company.
Sep 12, 2017
7
Capacit'e Infra Projects Limited | IPO Note
Income Statement
Y/E March (` cr)
FY13
FY14
FY15
FY16
FY17
Total operating income
18
214
556
853
1,157
% chg
1,105
159
54
36
Total Expenditure
21
200
493
739
999
Raw Material
15
155
421
625
853
Personnel
5
29
51
73
98
Others Expenses
2
16
21
40
47
EBITDA
(3)
15
63
115
158
% chg
-
331
82
38
(% of Net Sales)
(17)
7
11
13
14
Depreciation& Amortisation
0
2
9
16
18
EBIT
(3)
12
54
99
140
% chg
-
344
83
41
(% of Net Sales)
(18)
6
10
12
12
Interest & other Charges
1
4
15
32
42
Other Income
1
2
7
7
9
(% of Sales)
3
1
1
1
1
Extraordinary Items
-
-
-
-
-
Share in profit of Associates
-
-
-
-
-
Recurring PBT
(3)
11
46
74
107
% chg
-
-
323
61
43
Tax
1
7
14
26
37
PAT (reported)
(4)
4
32
49
70
% chg
(% of Net Sales)
(20)
2
6
6
6
Basic & Fully Diluted EPS (Rs)
(1)
1
6
9
13
% chg
-
-
679
52
43
Source: Company, Angel Research
Sep 12, 2017
8
Capacit'e Infra Projects Limited | IPO Note
Exhibit 13: Balance Sheet
Y/E March (` cr)
FY13
FY14
FY15
FY16
FY17
SOURCES OF FUNDS
Equity Share Capital
3
9
5
8
44
Reserves& Surplus
3
13
51
163
256
Minority Interest
1
1
2
2
2
Shareholders’ Funds
7
23
58
173
302
Total Loans
10
83
105
159
122
Other Liab & Prov
6
85
143
119
147
Total Liabilities
24
191
305
451
571
APPLICATION OF FUNDS
Net Block
6
88
169
233
255
Capital Work-in-Progress
-
0
-
8
7
Investments
0
5
5
0
0
Current Assets
45
219
357
613
749
Inventories
7
46
118
221
260
Sundry Debtors
10
86
152
275
334
Cash
20
56
40
37
52
Loans & Advances
8
28
42
73
68
Other Assets
1
3
5
6
35
Current liabilities
30
134
232
425
493
Net Current Assets
15
85
125
188
256
Other Non Current Asset
2
12
6
22
53
Total Assets
24
191
305
451
571
Source: Company, Angel Research
Sep 12, 2017
9
Capacit'e Infra Projects Limited | IPO Note
Cash Flow statement
Y/E March (`cr)
FY13
FY14
FY15
FY16
FY17
Profit before tax
(3)
11
46
74
107
Depreciation
0
2
9
16
18
Change in Working Capital
8
31
(16)
(121)
(76)
Interest / Dividend (Net)
(1)
(2)
(4)
(5)
(7)
Direct taxes paid
(1)
(5)
(12)
(16)
(24)
Others
(1)
(4)
(15)
(34)
(45)
Cash Flow from Operations
4
41
37
(17)
62
(Inc.)/ Dec. in Fixed Assets
(4)
(84)
(73)
(80)
(47)
(Inc.)/ Dec. in Investments
(0)
-
0
-
(0)
Cash Flow from Investing
(21)
(122)
(55)
(71)
(47)
Issue of Equity
9
12
2
63
60
Inc./(Dec.) in loans
11
75
28
63
(23)
Others
0
4
15
33
44
Cash Flow from Financing
19
84
15
92
(7)
Inc./(Dec.) in Cash
2
2
(3)
4
7
Opening Cash balances
-
2
4
1
5
Closing Cash balances
2
4
1
5
12
Source: Company, Angel Research
key Ratios
Y/E March
FY13
FY14
FY15
FY16
FY17
Valuation Ratio (x)
P/E (on FDEPS)
-357
316
40
27
19
P/CEPS
-364
197
31
20
15
P/BV
181
56
22
8
4
Dividend yield (%)
-
-
-
-
-
EV/Sales
72
6
2
2
1
EV/EBITDA
-422
90
21
12
9
EV / Total Assets
54
7
4
3
2
Per Share Data (`)
EPS (Basic)
-1
1
6
9
13
EPS (fully diluted)
-1
1
6
9
13
Cash EPS
-1
1
8
12
17
DPS
-
-
-
-
-
Book Value
1
4
11
33
58
Returns (%)
ROCE
-18
11
33
30
33
Angel ROIC (Pre-tax)
137
27
47
35
39
ROE
-51
18
55
28
23
Turnover ratios (x)
Asset Turnover (Gross Block)
2.9
2.4
3.1
3.3
3.9
Inventory / Sales (days)
139
79
77
95
82
Receivables (days)
203
147
100
118
105
Payables (days)
319
152
120
132
101
Working capital cycle (ex-cash) (days)
23
75
57
80
86
Source: Company, Angel Research, ratio calculated at Higher end price of IPO
Sep 12, 2017
10
Capacit'e Infra Projects Limited | IPO Note
Research Team Tel: 022 - 39357800
E-mail: [email protected]
Website: www.angelbroking.com
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