ARSS Infrastructure Projects has entered the capital market on Monday the 8th February 2010, with a public issue of Rs. 103 crores in the price band of Rs. 410 to Rs. 450 per share.
The company is a construction and contracting company with main presence in railway and roadwork. As at 10th January 2010, the total order book of the company was at Rs. 2,878 crores, of which railway orders were of Rs. 1,184 crores and road orders were of Rs. 1,164 crores. The company has executed orders for Indian Railways, Orissa Govt., RITES, IRCON, NTPC, NHAI, IOC, Vedanta Group and JSPL.
For FY09, the total income of the company was at Rs. 628 crores with net profit being placed at Rs. 51 crores resulting in an EPS of Rs. 40.60. The company has posted a CAGR of 117% in its revenue and 120% in its PAT over period between FY2007 to FY2009. For 9 months ending Dec. 09, the total revenue of the company was placed at Rs. 610 crores with PAT at Rs. 50 crores resulting in an EPS of Rs. 40 for the period. As fourth quarter of the company, as well as of the industry is always better, it should be able to post a topline of close to Rs. 860 crores and PAT of Rs. 70 crores which should result in an EPS of close to Rs. 48 for FY10 on the expected expanded equity base of close to Rs. 15 crores.
The company has been commanding better PAT margin of close to 8.20% largely due to focus on railway projects, where profit margin is better, due to the edge and specialization which the company has in executing such projects. The proposed IPO may result in a dilution of close to 16% to 18%, depending on the discovery of the price band. Also, as the company has orders in hand of Rs. 2,878 crores, same are likely to get executed in next 2 years which hints for a growth of over 30% over next 2 years. This should therefore be EPS accretive as dilution under no circumstances is likely to be over 20%.
The issue at the upper price band of Rs. 450 is discounting FY10 earnings of the company by less than 10 times while at the lower band of Rs. 410 it will be less than 9 times. Similar companies in the secondary market are ruling at a PE of over 12 times. So issue seems to be having scope of appreciation on listing and going ahead. It would be prudent and extra sweeter if book is discovered at lower end, giving better margin of safety to the prospective investors.