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BROKING | DEPOSITORY | DISTRIBUTION | FINANCIAL ADVISORY|MERCHANT BANKING
RITES LTD
IPO Report
Issue Date 20th June-22nd June 2018
Price Band 180-185/Share*
Bid Lot 80 & in multiplethereof
Face Value Rs 10/Share
Listing BSE, NSE
Offer For Sale 25,200,000 Eq Shares
Fresh Issue ----
Pre Issue Eq Shares 20.00 Cr Eq Shares
Post Issue Eq Shares 20.00 Cr Eq shares
BRLM Elara Capital(India) Ltd,
IDBI Capital Markets &
Securities Ltd , IDFC Bank
Ltd, SBI Capital Markets Ltd
Registrar Link Intime India Private Ltd
*: Discount of Rs 6/Share has been offered to retail &
employees.
Research Analyst : Astha Jain
IPO Details
Co is a wholly owned Government Company, a Miniratna (Category – I) Schedule ‘A’ Public Sector Enterprise and a leading player in the transport consultancy and engineering sector in India and the only company having diversified services and geographical reach in this field under one roof. Co is a multidisciplinary engineering and consultancy organization providing diversified and comprehensive array of services from concept to commissioning in all facets of transport infrastructure and related technologies.
Strong order book & financial performance: Co’s revenue from operations has increased at a CAGR of 15.60% from Rs 10,126.88 million in the Financial Year 2015 to Rs 13533.56 million in the Financial Year 2017, and its profit after tax has increased at a CAGR of 7.63% from Rs 3,122.12 million in Financial Year 2015 to Rs 3,616.60 million in the Financial Year 2017. On standalone basis, co have an order book of Rs 48,186.76 million as on March 31, 2018 which includes 353 ongoing projects of value over Rs 10 million each.
Comprehensive range of consultancy services and a diversified sector portfolio in the transport infrastructure space : Co’s offerings in transport infrastructure consultancy and engineering services consist of conducting techno-economic feasibility studies and preparation of detailed project reports, design engineering activities, procurement assistance, project management activities, quality assurance, inspection, training, construction supervision, materials system management, transaction advisory and commissioning support including operation and maintenance. Preferred consultancy organization of the Government of India including the Indian Railways. Co is a nominated organization of the Indian
Railways for the export of railway locomotives, coaches and other equipment
which are manufactured by the Indian Railways (other than exports to Malaysia,
Indonesia and Thailand). Co is also a nominated organization for inspection of
various materials and equipment purchased by the Indian Railways.
Valuation:
The co is bringing the issue at p/e multiple of approx. 11 on annualized
9MFY18 eps at price band of Rs 180-185/share. Co being the preferred
consultancy organization agency of the Government of India including the
Indian Railways has healthy order book with strong and diversified clientele
base across sectors. Looking after valuations we find issue to be reasonably
priced . Hence, we recommend “Subscribe” on issue.
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RITES LTD
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Company Overview
Co is a wholly owned Government Company, a Miniratna (Category – I) Schedule ‘A’ Public Sector Enterprise and a leading player in the transport consultancy and engineering sector in India and the only company having diversified services and geographical reach in this field under one roof. Based on Public Enterprise Survey 2015-2016, company is ranked no. 1 based on net profit and dividend declared in Industrial Development and Technical Consultancy Services sector. Co have an experience spanning 44 years and have undertaken projects in over 55 countries including Asia, Africa, Latin America, South America and Middle East regions. Co is the only export arm of Indian Railways for providing rolling stock overseas (other than Thailand, Malaysia and Indonesia). Co is a multidisciplinary engineering and consultancy organization providing diversified and comprehensive array of services from concept to commissioning in all facets of transport infrastructure and related technologies. Co have significant presence as a transport infrastructure consultancy organization in the railway sector. However, co also provide consultancy services across other infrastructure and energy market sectors including urban transport, roads and highways, ports, inland waterways, airports, institutional buildings, ropeways, power procurement and renewable energy. Co have, over the years, served various public sector undertakings, government agencies and instrumentalities and large private sector corporations, both in India and abroad. Since its inception in 1974, co have evolved from its origins of providing transport infrastructure consultancy and quality assurance services and have developed expertise in: • Design, engineering and consultancy services in transport infrastructure sector with focus on railways, urban transport, roads and highways, ports, inland waterways, airports and ropeways; • Leasing, export, maintenance and rehabilitation of locomotives and rolling stock; • Undertaking turnkey projects on engineering, procurement and construction basis for railway line, track doubling, 3rd line, railway electrification, upgradation works for railway transport systems and workshops, railway stations, and construction of institutional/ residential/ commercial buildings, both with or without equity participation; and • Wagon manufacturing, renewable energy generation and power procurement for Indian Railways through co’s collaborations by way of joint venture arrangements, subsidiaries or consortium arrangements.
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RITES LTD
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Investment Rationale
Large order book with strong and diversified clientele base across sectors
As of March 31, 2018, co’s order book stands at Rs 48,186.76 million, which includes 353 ongoing projects of value overs 10 million each.In India, co’s clients include various central and state government ministries, departments, instrumentalities as well as local government bodies and public sector undertakings. These include Indian Railways, NTPC, Dedicated Freight Corridor Corporation of India Limited, High Speed Rail Corporation of India Limited, Public Works Department, DMRC, Steel Authority of India Limited, Rashtriya Ispat Nigam Limited, Hindustan Petroleum Corporation Limited, Bharat Coking Coal Limited, Metro Link Express for Gandhinagar and Ahmedabad (MEGA) Company Limited, Indian Port Rail Corporation Limited, Airports Authority of India, among others. Co also engage with various large private sector corporations including L&T Metro Rail (Hyderabad) Limited, Kanti Bijlee Utpadan Nigam Limited (KBUNL), Cimmco Limited, Titagrah Wagons Limited, Snowmex Engineers Limited, Unity Infraprojects Limited, Rajdeep Buildcon Private Limited, Mahalsa Constructions Private Limited, Marymatha Constructions Limited, AFCON Infrastructure Limited, INCAP, ARK Services, MNEC Consultants Private Limited, Indian Geotechnical Services Limited, Geokno India Private Limited and NATRIP Implementation Society among others. Strong and consistent financial performance supported by robust internal control and risk
management system
Co have been consistently profitable over the last five years and have paid dividends regularly to the equity shareholders. As per Restated Financial Information, co’s total income has grown at a CAGR of 9.61% from Rs10,830.52 million in the Financial Year 2013 to Rs 15,632.73 million in the Financial Year 2017 and its profit after tax has grown at a CAGR of 11.61% from Rs 2,330.57 million in the Financial Year 2013 to Rs 3,616.60 million in the Financial Year 2017. As on December 31, 2017, the net worth of Company was Rs 21,719.94 million. Co’s earnings per share from continuing and discontinued operations have increased from Rs 11.65 in the Financial Year 2013 to Rs 17.63 in the Financial Year 2017. In recognition of co’s consistent performance and achievement of stipulated targets as negotiated in terms of the Memorandum of Understanding entered into with the MoR on an annual basis, the Department of Public Enterprises, Ministry of Heavy Industries and Public Enterprises, Government of India has rated company ‘Excellent’ with a score of 90.09 for the financial year 2016-2017. Co have also been rated consistently as “Excellent” in the previous five financial years (i.e. from FY 2012 to FY 2016).
Risk factors
Co face certain competitive pressures from the existing competitors and new entrants in both public and private sector. Increased competition and aggressive bidding by such competitors is expected to make co’s ability to procure business in future more uncertain which may adversely affect co’s business, financial condition and results of operations.
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RITES LTD
BROKING | DEPOSITORY | DISTRIBUTION | FINANCIAL ADVISORY|MERCHANT BANKING
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Objects of Offer
The objects of the Offer are (i) to carry out the disinvestment of 24,000,000 Equity Shares held by the
Selling Shareholder in the Company, equivalent to 12% of the issued, subscribed and paid up Equity
Share capital of the Company as part of the Net Offer, and 1,200,000 Equity Shares that will be reserved
for Employee Reservation Portion, and (ii) to achieve the benefits of listing the Equity Shares on the
Stock Exchanges
Financial Statements
Rs Cr
Particulars FY15 FY16 FY17 9M FY18 Total Income 1012.69 1090.53 1353.36 936.15 Operating Exp 665.74 734.15 995.08 636.50 EBIDTA 346.95 356.38 358.28 299.65 EBIDTA Margin (%) 34.26 32.68 26.47 32.01 Other Income 146.42 136.20 209.92 124.91 Depreciation 26.15 34.64 38.26 27.68 EBIT 467.22 457.93 529.94 396.89 Interest 0.00 4.71 11.33 5.27 PBT 467.22 457.93 529.94 396.89 E/O Item 1.03 -2.60 -11.47 -2.31 PBT After E/O Item 468.24 450.62 507.14 389.30 Tax 156.03 167.69 145.38 136.76 PAT 312.21 28293 361.76 252.54 Other Comp Inc 0.00 0.00 0.00 0.000 Adjusted PAT 312.21 282.93 361.76 252.54 NPM(%) 30.83 25.94 26.73 26.98 Eq Capital 100.00 100.00 200.00 200.00 Res & Surplus 1576.16 1763.52 1841.10 1971.99 Net Worth 1676.16 1863.52 2041.10 2171.99 Eq Shares ( In No) 10.00 10.00 20.00 20.00 EPS 31.22 28.29 18.09 12.63 ROE (%) 18.63 15.18 17.72 11.63 ROCE (%) 27.87 22.96 24.50 17.47 Book Value 167.62 186.35 102.06 108.60
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HEM SECURITIES LIMITED
MEMBER-BSE,CDSL,SEBI REGISTERED CATEGORY I MERCHANT BANKER
Sebi Registration No For Research Analyst: INH100002250
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GROUP COMPANIES
HEM FINLEASE PRIVATE LIMITED
MEMBER-NSE
HEM MULTI COMMODITIES PRIVATE LIMITED
MEMBER-NCDEX, MCX
HEM FINANCIAL SERVICES LIMITED
NBFC REGISTERED WITH RBI
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The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities
or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the
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