Rachana Infrastructure Limited

Started in 2001, Rachana Infrastructure Limited, Ahmedabad - Gujarat based company, is engaged in the business of Construction of Road projects on Bill of Quantities (BOQ) and EPC basis. In the very initial periods, the Company got the contracts from the Government (Zilla Panchayat) at a very small scale. In addition, they got sub contracts from the infrastructure Companies from Gujarat, Maharashtra and many other states. Over a period of time, Company got expertise in the traditional construction of Buildings, Road Construction, Irrigation, Hydro power Project and Mining. With time and experience, they started expanding the business in the other states of the Bharat like Maharashtra, Madhya Pradesh, Jharkhand and Rajasthan. Company has successfully completed many projects in various departments of Government of India. The Company has an established track record of executing projects with over 02 decades of experience in construction activities. Some of the satisfied clients are Public Works Department of Madhya Pradesh, Road and Building Department of Gujarat State, Madhya Pradesh Road Development Corporation, Power Grid Corporation of India, Gujarat Minerals Development Corporation, Road Construction Department of Jharkhand, ONGC Petro-Additions Limited, Ahmedabad Municipal Corporation, and Ahmedabad Urban Development Corporation etc. The order book comprises the unfinished and uncertified portion of projects that they have undertaken and includes the value of sub-contracting agreements that they enter into with the joint ventures for work to be performed by them. The order book as of December 31, 2021, was Rs. 23.86 Cr. The orders in the order book are subject to cancellation and modification provisions contained in the various contracts and other relevant documentation. As per financial performance, Rachana Infra has posted total income/net profits of Rs 113.93 Cr / Rs 4.66 Cr (FY19), Rs 158.40 Cr / Rs 5.97 Cr (FY20), Rs 107.06 Cr / Rs 4.55 Cr (FY21) and Rs 41.71 Cr / Rs 1.4 Cr (9M FY22). So company has shown zig-zag results. Company has posted an average EPS of Rs 3.2 and average RoNW of 14.31% for last three fiscals. Issue is priced at a P/B of 3.23 as per NAV of Rs 42.76 post issue. As per FY21 earnings on fully diluted equity post issue, asking price is at P/E of around 56 and as per annualised FY22 earnings P/E is 138. As per RHP, Comparison between listed peers are shown in above table.     On BRLM's front, Interactive Financial Services Limited associated with this SME IPO and has handled 2 SME IPO in last 3 years. From last two IPOs one opened above issue price and one below issue price. As of now both are trading below issue price. ( on 20.05.22 ) As per financials Rachana Infrastructure Limited, has shown zig-zag results, RoNW is 11.63% and P/E is respectively 56 and 138 as per FY21 and annualised FY22 earnings, which looks aggressively priced. Company has good order-book and sector is also has huge growth opportunities. But it's highly competitive and fragmented segment. Performance of BRLM is poor. So we are giving AVOID rating to this IPO.

• 1 Mr. Girishkumar Ochchhavlal Raval
• 2 Mrs. Bhaminiben Baldevprasad Mehta