Likhitha Infrastructure IPO – Should You invest ?

Given that IPOs have been a mixed bag for the retail investor, how should they approach the upcoming IPOs?
Only good and established companies are entering the market now.
Most of them are also offering shares at valuations comparable to peer group stocks, and that is good for investors

In this regard, Let’s have a detailed review of the company and analytics of the Likhitha Infrastructure Limited IPO release date, IPO offer price, subscription, allotment, grey market price and other details like the company’s background, its financial positions, its promoters and other related things.

Basic Details of IPO

PRICE AND SIZE

TIME SCHEDULE OF INTIAL PUBLIC OFFER

Grey Market Premium

Although the grey market premium of all these upcoming IPOs may have taken a hit due to the recent market weakness. Grey Market Premium (per share) of Likhitha Infrastructure is ranging between Rs.5 – Rs.15 per share.

About the Company

They are one of the Oil & Gas pipeline infrastructure company in India, focused on laying pipeline networks along with the construction of associated facilities; and providing Operations & Maintenance services to the City Gas Distribution (“CGD”) Companies in India. Their primary focus and vision are to sustain profitable growth by executing projects in time to the satisfaction of their clients. They are proud to have managed 10.75” OD x 69 Kms Petroleum Product Pipeline for the first-ever Trans-National Cross-Country Pipeline of South-East Asia connecting India to Nepal, in the Year 2019, for the supply of petroleum products

The Promoters of this company are MR. Srinivasa Rao Gaddipati and MS. Likhitha Gaddipati. The lead manager to the issue is Unistone Capital Pvt Ltd. The Registrar of this issue is Bigshare Services Pvt Ltd.

Factors to Know before applying for IPO in this company

-The company has strived to maintain a strong financial position with emphasis on having a strong balance sheet and increased profitability. Between 2015 and 2020, the income of the company has grown at a CAGR of 38.96%.

-Likhitha Infrastructure Limited order book as of July was approximately ₹950 crore.

-Their directors have no interest in any property acquired or proposed to be accepted by their Company two (2) years before the date of this Draft Red Herring Prospectus.

-A large equipment base, technically qualified and experienced employee pool, comparatively lower cost centre of operations and robust project management systems and capabilities enable the company to execute large as well as complex projects.

-The company owns and maintains a diverse range of equipment such as Pipe Layers (Side-boom), Excavators, Horizontal Directional Drilling Machines, Compressors, Generator sets, Welding Machines, etc. which allows it to meet the majority of the requirements for its on-going projects.

-It depends on a limited number of clients for a significant portion of its revenue. The loss of any of its major client due to any adverse development or considerable reduction in business from its major client may adversely affect its business

-The company is required to furnish financial and performance bank guarantees as part of its business. Its inability to arrange such a warranty or the invocation of such warranties may result in forfeiture of bid security or earnest money deposit and termination of the relevant contract thereby affecting the results of its operations

Our Final Verdict

At the higher end of the price band which is between 117-120, the IPO after accounting for the share dilution after the issue will stand at a market cap to sales of nearly 1.45, which is cheaper than other peers, who are trading at the market cap to sales of an average 5. Price to earning wise, the issue is available at 11.97, which is on the slightly higher side.

By looking at this valuation on higher side and keeping in view other options available in the market, We advise to AVOID this issue.