Reports indicate that private-sector firms raised Rs 28,225 crore through initial public offerings (IPOs) in FY2016-17, said to be among the best in six years. And in the June edition of CW this year, we highlighted how the IPO league is thriving with companies such as Capacit'e Infraprojects having filed their draft red herring prospectus (DRHP) earlier this year. The Mumbai-based company, which provides end-to-end construction services for residential buildings, commercial and institutional segments, launched its IPO last month. <p></p> <p>The floor price was 24.5 times that of the face value and the cap price was 25 times of the face value. </p> <p> <span style="font-weight: bold;">The plan</span><br /> The IPO comprises a net issue aggregating up to Rs 4,000 million. The company proposes to utilise the net proceeds of the issue for funding working capital requirements; purchase of capital assets (system formwork); and general corporate purposes. As<span style="font-weight: bold;"> Rohit Katyal, Promoter &amp; Executive Director, Capacit'e Infraprojects,</span> elaborates, 'Rs 250 crore is for long-term working capital, Rs 50 crore for capex, about Rs 75 crore for general corporate purposes, and the remainder Rs 20 crore for issue expenses.' With an order book of Rs 46,025 million as on May 31, 2017, the company recorded a CAGR revenue growth of over 75 per cent from 2014 to 2017. It is currently executing 56 ongoing projects. </p> <p> <span style="font-weight: bold;">Tech-focussed</span><br /> The company has a dedicated team that studies technologies adopted globally for high-rises. </p> <p>It focuses on technology, formwork and equipment and invests in these throughout the project cycle. </p> <p>'We are owners of modern system formwork, such as automatic climbing system, aluminium, table, composite panel and tunnel formwork,' says Katyal. He adds, 'We are looking at procuring formwork systems. We have to invest both in engineering and capex through tower cranes, concrete pumps, etc, given the size of our increasing order book.'</p> <p> Clear strategy For Katyal, 'The company's key investment thesis includes exclusive focus on construction of buildings in major cities, large order book with marquee client base and repeat orders, ownership of modern system formworks and other core assets, access to skilled workforce, experienced promoters, directors and management team, and a strong financial performance.' Going forward, too, the focus is clear: Construction of buildings in key urban areas'We specialise in constructing high-rise and super high-rise buildings, and are geographically diversified with a predominant focus on clientele in the MMR, NCR and Bengaluru,' he adds. 'We have refrained from activities such as land or infrastructure development to ensure a focused business approach with an eye on profitability.'</p> <p>As for leveraging the IPO for debt removal, Katyal shares, 'Our debt on an absolute basis is about Rs 150 crore, which translates into 0.5x, one of the lowest in the industry. On a net basis, it is about 0.35x. So, after the IPO, we are virtually debt-free.'</p> <p> <span style="font-weight: bold;">Details of the IPO </span><br /> <span style="font-weight: bold;">Type of offering:</span> IPO of equity shares.<br /> <span style="font-weight: bold;">Offer size:</span> Rs.4,000 million.<br /> <span style="font-weight: bold;">Primary or secondary split: </span>100 per cent primary.<br /> <span style="font-weight: bold;">Use of proceeds: </span>Working capital requirements; purchase of capital assets; general corporate purposes.<br /> <span style="font-weight: bold;">Price band: </span>Rs.245-250 per equity share, each with a face value of Rs.10.<br /> <span style="font-weight: bold;">Bid lot size:</span> 60 shares.<br /> Bid or issue opening and closing: September 13, 2017 to<br /> September 15, 2017.<br /> <span style="font-weight: bold;">Book running lead managers: </span>Axis Capital, IIFL Holdings, Vivro Financial Services.<br /> <span style="font-weight: bold;">Advisor to the company:</span> Marathon Capital Advisory. <br /> </p> <p><span style="font-weight: bold;">- SERAPHINA D'SOUZA</span></p>