Vishnu Prakash R Punglia Limited IPO
Vishnu Prakash R Punglia Limited, an engineering, procurement, and construction (EPC) company, was founded in 1986 and specializes in designing and building infrastructure projects for the Central and State Governments, autonomous organizations, and private organizations in India’s nine states and one union territory. The company’s activities can be roughly categorized into four types;
Projects for Water Supply (WSP), Railway Initiatives, Highway Projects, Projects for Irrigation Networks
Regarding the sector
The Indian economy’s main engine is the infrastructure industry. The government puts great importance on this sector since it is crucial to India’s overall growth and because it can help to ensure that world-class infrastructure is built in the nation on schedule. Power, bridges, dams, highways, and urban infrastructure are all included in the infrastructure industry.
Infrastructure development is essential if the country wants to reach a US$ 5 trillion GDP by 2025. In an effort to boost the growth of the infrastructure industry, the government implemented the National Infrastructure Pipeline (NIP), along with further initiatives like “Make in India” and the production-linked incentives (PLI) programme.
Historically, funding for transportation, power, and water & irrigation has accounted for more than 80% of the nation’s infrastructure spending. The State and Private sectors each have 39% and 22% of the NIP, respectively, while the Center holds 39% of the total.
Wastewater management and water supply
By 2050, it is anticipated that 1,450 cubic km of water will be needed, of which approximately 75% will be utilized for agriculture, 7% for drinking water, 4% for industry, and 9% for the production of electricity. The need for drinking water will, however, take precedence over the needs for rural water due to the rising urbanization. Many of the cities are built along the banks of rivers, where the populace uses freshwater and then dumps wastewater back into the waterway, contaminating the river and the irrigation water. Urban wastewater management, planning, and treatment now face significant issues as a result.
The Central Pollution Control Board anticipated that for the years 2020–21, wastewater generation would be around 39,600 MLD in rural areas and 72,368 MLD in urban areas. Because more water is available for sanitation, which has raised the level of living, the estimated volume in urban centres is almost twice as large as that in rural areas.
Generation and treatment of urban waste
In India, the existing sewage treatment capacity is 31,841 MLD, yet the country’s urban area generated 72,368 MLD of sewage in 2020–21. 26,869 MLD is the operational capacity, which is far less than the load generation. Only 28%, or 20,236 MLD, of the total sewage generated was processed, meaning that 72% of the wastewater was dumped in different bodies of water including rivers, lakes, or underground water.
Although certain capacity increases, such as 4,827 MLD of sewage treatment, have been suggested, there is still a 35,700 MLD, or 49%, gap between the production of wastewater and its treatment.
Railways
About 9,000 freight trains and 13,500 passenger trains, totaling over 24 million people and more than 203 million tonnes of freight, are operated by Indian railways.
In Budget FY24, the Government has suggested increasing the budgetary allocation to Railways by 70% YoY, or $2,400 billion.
Around 70% of India’s estimated capital spending on infrastructure is expected to be spent on industries like energy (24%), highways (18%), urban (17%), and railways (12%) between the fiscal years 2020 and 2025. In order to increase both immediate and potential GDP growth, NIP has coordinated the creation of infrastructure in India by including all relevant parties.
Highway and Road Industry
India is the second-largest road network in the world, behind the USA, with a total length of 6.37 million km. 60% of the nation’s freight traffic and 87% of all passenger traffic in India are supported by this road network.
The building of National Highways has been a major area of attention in order to move the country forward, although state highways, district roads, and rural roads continue to make up a sizable portion of the overall road network.
How are EPC contracts carried out?
According to the Engineering, Procurement, and Construction (EPC) Model partnership, the private sector partner will handle the project’s engineering and construction needs while the government is responsible for providing the project’s overall finance.
The fact that the Government bears the entire cost is frequently noted as a model limitation.
The government solicits bids for engineering services from the contractors, and it pays for the procurement of raw materials and construction costs.
The EPC Contractor is in charge of all operations and project handover to the Government from design through commissioning.
Since the private participant in this approach is unaffected by project financing, there is obviously little to no risk for them. The concept mandates that the government even fund road construction in addition to bearing all other liabilities associated with property acquisition, compensation, commercial, traffic, and security.
Therefore, properly speaking, the EPC MODEL cannot be regarded a PPP MODEL because it is really just a straightforward contract that the government gives to a private party to have a project done.
Objects of this issue and the way it is utilized
Vishnu Prakash R Punglia Ltd.’s Rs. 308.88 crore public offering is wholly made up of a fresh issue of up to 31.2 million shares. A portion of the deal is also available to qualified employees.
Financial data along with other valuation metrics (in crores)
Risk elements to think about:
Dependence on a small number of customers: For the nine (9) months that ended on December 31, 2022, as well as the fiscal years that ended on March 31, 2022, March 31, 2021, and March 31, 2020, our top five (5) customers were responsible for roughly 80.14%, 81.92%, 82.98%, and 77.51%, respectively, of our operating revenues. Any large client loss could have a negative impact on the company’s operations, finances, and business results.
Geographical Concentration: As of December 31, 2022, 72.50% of the company’s pending Order Book was made up of active projects in the state of Rajasthan. Since the majority of the company’s operations are centered in northern India, any unfavorable changes there could have a negative impact on the company’s operations, financial position, and performance.
Increased trade receivables and inventories: Trade receivables and inventories account for a sizeable portion of the company’s current assets and net value. Trade receivables and inventory represented 65.30%, 58.99%, 62.05%, and 62.80% of the total assets as of December 31, 2022, March 31, 2022, and March 31, 2020, respectively.
IMPORTANT DATES
