Punj LLoyd - IPO

Source: opendb.net
Author: Mint

Business of Punj Lloyd

Punj Lloyd is an engineering and constructions company, which provides integrated design, engineering, procurement, construction and project management services for energy and infrastructure sector projects. The operations are spread across the regions of the Middle East, the Caspian, The Asia Pacific, Africa and South Asia. Punj Lloyd has got 13 subsidiaries and has executed upwards of 170 projects in 12 countries.
Punj Lloyd has over 20 years of experience in construction projects and in that time it has executed 11 refinery modernization and up gradation projects and engaged in 14 highway projects.

Financial Information

The topline of Punj Lloyd has grown consistently over the last few years. From revenues of around Rs. 500 crores in fiscal 2001, last year the company clocked in revenues of Rs.1492 crores. Although this was not significantly greater than the revenues it clocked in the year prior to that (Rs.14149 crores), when seen in the context of the growth overall in the last five years one can see that the growth enjoyed by the company is good.
While the topline has grown consistently the fluctuations in the bottomline and even the case of adjustments in the reported Net Profits is a cause for concern. From a profit of Rs.275 million in the year 2001 the profit was down to as low as Rs.6.25 million in the last fiscal.
Consequently the EPS last fiscal was just Rs.0.12 while it was Rs.12.58 the year before and Rs.4.52 the year before that and the Book Value per share last fiscal was Rs.209.80.

Objects of the Issue

The main reasons for the issue are to raise money for capital expenditure, to prepay debt and equity investments in infrastructure projects. Out of these three the company intends to spend Rs.1500 million on acquiring equipment like dozers, hydraulic excavators boring machines etc.
The company also intends to pay off debt to the tune of Rs.3500 million which it has taken from various financial institutions. Punj Lloyd has debt aggregating to Rs.11168 million both long term and short term as well as working capital.
Another Rs.500 million is to be raised to be invested in fully owned subsidiaries and bid in certain kind of projects both in India and abroad which required creation of Special Purpose Vehicles to execute projects of such nature.

Conclusion

The company has done well in its growth of revenues in the last few years and has been in existence for over 20 years and has expertise in the area of operations. The pricing of the IPO however must reflect the inconsistency in the profits over the past years and it should be at a considerable discount to its other peers like L & T.