India’s IPO rush continues to persist into 2024. Now, riding on this wave is Konstelec Engineers, a leading EPC company specialising in electrical infrastructure projects. With over two decades of expertise and a robust order pipeline of ₹573 crore, Konstelec presents an attractive investment case.
But does it have the power to charge up your portfolio amidst an influx of IPOs? Read on to find out Konstelec’s financials, risk factors, and more to make an informed decision regarding investing in this IPO.
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About Konstelec Engineers
Konstelec Engineers is engaged as an EPC contractor, specialising in providing comprehensive project management, procurement assistance, and advanced engineering solutions for a wide range of electrical infrastructure initiatives within India as well as overseas.
The company’s work is performed for a variety of processing and production sectors, including oil and gas, medicines, hospitals, medical facilities, and retail spaces.
Companies like HPCL, ISRO, ACC, and BARC are among the many that KEPL (Konstelec Engineers Pvt. Ltd.) serves. The business provides its services in more than 15 Indian and Nigerian states.
History
Launched as a modest design engineering business in December 1995, Konstelec Engineers Limited has since grown into what it is today. From its humble beginnings as a design engineering business, the company has grown to provide a full spectrum of services for electrical infrastructure projects throughout India and abroad.
Mission and vision
The company’s highest priority lies in meeting and exceeding client expectations in all areas, including quality, dependability, performance, and cost. Research, development, training, delivery, speed, and doing an outstanding job will continue to be their main missions.
The company’s vision lies in its long-term goal to establish itself as a world-class engineering, procurement, and construction (EPC) company known for its innovative solutions and services.
Their objective is to grow on a global scale, particularly in the MENA (Middle East and North Africa) region, by combining organic growth with inorganic expansion carried out through joint ventures and strategic alliances.
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Konstelec Engineers today
There are more than fifty large projects in different stages of execution on KEPL’s order book, with a total order value of ₹573 crores. The Rajasthan Refinery Project and JSW Vijayanagar Metallics are just two of the prominent corporate clients that the company has been providing with electrical, construction power, and instrumentation services.
During the first six months of the current fiscal year, Konstelec Engineers reported a profit after tax (PAT) of ₹4.56 crore, an EBITDA of ₹7.08 crore, and a turnover of ₹93.05 crore.
Konstelec Engineers’ financials
| Financials | September 30, 2023 | March 31, 2023 | March 31, 2022 | March 31, 2021 |
| Revenue after operations (in ₹ lakhs) | 9,305.27 | 15340.49 | 10704.72 | 10489.43 |
| Profit after tax (in ₹ lakhs) | 456.16 | 777.77 | 352.25 | 190.34 |
| Net Worth | 6,647.68 | 6,191.50 | 5,423.73 | 5,071.48 |
| Total borrowings (in ₹ lakhs) | 4,109.45 | 3,507.15 | 2,650.59 | 2,548.12 |
Konstelec Engineers SME IPO details
Konstelec Engineers’ IPO has been subscribed 26.28 times so far on day 1. The company’s shares are fetching a strong GMP of ₹70 on the unlisted market.
| Konstelec Engineers’ IPO Date | January 19, 2024 |
| IPO issue closing date | January 23, 2024 |
| Face value | ₹10 per share |
| Konstelec Engineers’ IPO share price/ Price band | ₹66 to ₹70 per share |
| Lot size | 2000 |
| Issue size | ₹28.70 cr. (4,100,000 shares) |
| Fresh issue | ₹28.70 cr. (4,100,000 shares) |
| Issue type | Book built issue IPO |
| IPO reservations | 18.98% to QIB, 14.29% to NII, 33.27% to RII, and 28.44% to Anchor investors |
The expected listing price of Konstelec Engineers is estimated at ₹135 per share, which is 92.86% more than the IPO price of ₹70, taking into account the upper end of the IPO pricing range and an ongoing grey market premium.
A “grey market premium” happens when buyers are willing to pay a premium above the issue price.
Shareholding pattern prior to IPO
| Shareholder | Shareholding percentage |
| Biharilal Ravilal Shah | 60.70% |
| Amish Biharilal Shah | 18.49% |
| Nirupama Shah | 4.64% |
| Ganesh Shanbag | 4.55% |
| Jatin Shah | 3.50% |
| Jigar Shah | 3.20% |
| Rajul Shah | 2.60% |
| Dipti Jigar Shah | 2.02% |
Fund utilisation plan
Konstelec intends to use most of the funds it raises towards its operational expenditures (₹1,800 lakhs), such as buying high-quality materials for its long-term initiatives and serving as collateral for different customers. The rest will go towards paying for public issues and other general company purposes.
Is it safe to invest in Konstelec Engineers SME?
KEPL is an authorised electrical contractor that has finished over two hundred projects of varying sizes and complexity, including 40+ major projects valued at over ₹400 crores, both in India and overseas.
The company’s management claims that it operates in 15 states throughout India. The company’s future looks bright thanks to the government of India’s massive infrastructure drive.
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Why should you consider investing?
- Promoters’ expertise and a solid order book
The founders’ technical credentials and twenty years of expertise in the electrical equipment installation, testing, and commissioning business have given them an in-depth knowledge of the field and allowed them to establish strong ties with both suppliers and clients.
A wide variety of industries, including hydrocarbons, steel, and others, are among the clients of the company. In terms of revenue visibility for the medium term, the company’s existing unexecuted order book of ₹317 Cr as of April 30, 2023, is rather strong.
- Moderately exposed to financial risk
With a net value of 6,647.68 lakhs as of September 2023, KEPL has an acceptable capital structure. Without engaging in any substantial debt-funded capital expenditures, the business is expected to maintain a modest capital structure in the medium to long run.
As of March 31, 2023, the company’s debt protection indicators were relatively low, with interest coverage expected at 3.14 times and net cash accruals to adjusted debt at 0.22 times.
Factors to look out for before investing
- Client and geographic concentration
India accounts for the majority of the company’s operating income. Any unfavourable event impacting its activities in India can have a negative effect on the company’s operations, finances, and business.
The company’s revenues also rely on only a handful of clients. Revenues and profitability might be affected if any of these major customers decide to leave.
- Project execution delays and uncertainties
KEPL is responsible for the on-site installation and commissioning of electromechanical equipment for customers. Nevertheless, the company isn’t involved in any civil construction projects.
It is still vulnerable to revenue unpredictability, even when it has orders. Construction of the civil works and necessary permissions may take longer than expected, which might affect the installation and commissioning schedules.
Conclusion
Given its experienced leadership, healthy order pipeline, and growth opportunities in infrastructure, Konstelec Engineers seems to be a company poised for expansion. However, concentration risks persist.
In conclusion, make sure to consider your risk appetite before subscribing to this business.
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