SVEC Constructions Limited is entering Indian primary market with a Public issue of 40, 00,000 equity shares of Rs.10 each. The issue is a 100% Book Built. Below are the salient features of this issue:
Business of the Company
Company is engaged in the business of Civil, Electrical and Mechanical Construction works on contract basis with Government and Semi Government Organizations and projects under execution currently span six states across India. Company has so far executed 3 million square meters of Cement Concrete Lining. Company has also executed 6 million cubic meters of earth work excavation. Company is managed by experienced Board of Directors supported by well –qualified professionals in various disciplines like Civil, Electrical and Mechanical Engineering as well as Finance and Administration.
Promoters
Company is promoted by the Mr. C. Ajad Kumar, Chairman & Managing Director of the company who has an Engineering Degree from the University of Mysore. Other promoters are Mr. C. Sreemannarayana, Executive Director, Mrs. K. Bhanu Smitha and Mrs. C.L.R. Bhavani, Non–Executive Director.
Financials
SVEC Constructions Limited is a profit making company. For the FY ended March 31, 2006, the company clocked a turnover of Rs. 94 crores. The net profit for the same period was about Rs.5.46 crores. For FY 2007, till Dec’2006, company had clocked a turnover of Rs. 105 crores and a net profit of Rs.6.18 crores. For FY 2005 and FY 2004, the top line was Rs. 55 and Rs. 58 crores approximately. The net profit for FY 2005 was Rs. 1.75 crores and for FY 2004 net profit was Rs. 1.62 crores.
Particulars of the Issue
SVEC Constructions Limited IPO is a fresh 100% Book Building issue of 40, 00,000 Equity Shares of Rs. 10 each. In terms of the SEBI guidelines, 20% of the post issue capital, held by promoters will be locked-in for 3 years and the balance entire pre-issue holding i.e. 8650080 equity shares will be locked-in for 1 year.
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Basis for Issue price
SVEC Constructions Limited claims that it has experience spanning 40 years in construction. It is registered under various categories for undertaking Government and quasi Government projects across various states which indicates its geographic reach. Also it is a consistently profit making company.
Objects of the Issue
The main object is to purchase capital equipment for various construction related activities. Company has purchased equipment worth Rs.1548.75 lakhs during the 21 month period 01.04.2005 to 31.12.2006 and there is a further need for capital equipment to be procured for its ongoing projects. The Company has estimated capital equipment requirement to the tune of Rs. 1532 lakhs for the construction of buildings, canal and roads. Working capital requirements and need to list the shares on stock exchanges are the other need for this issue.
Risks
Following are the key risks which can impact company’s performance:
a. Given the long-term nature of the projects the Company undertakes, it faces various kinds of implementation risks.
b. Failure to adhere to agreed timelines could adversely affect Company’s reputation and/or expose it to financial liability.
c. Competition and engagement of Sub-contractors for execution of works are operating risks involved in company’s business.
d. Company depends extensively on government and various government agencies for business.
e. Fall of demand in real estate sector can adversely impact the company.
f. Scarcity of skilled resources can lead to delays in execution of projects.
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