IPO listed on 8 Aug'24
Ceigall India Ltd
Minimum Investment
₹ 14,837 / 37 shares
Grey market premium
₹ 89 (22% premium)
Issue price
₹ 401
Listing price
₹ 408
Listing gains
7 (2%)
Listing on
Aug 8, 2024
Our Verdict:
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- Ceigall India Ltd has shown significant growth in revenue and profits, leveraging an asset-light model that ensures superior asset turnover and return metrics, outperforming its peers. Further, the company is authorized to bid on substantial NHAI projects—up to Rs 5,700 crore in EPC mode and Rs 5,500 crore in Hybrid Annuity mode—highlighting its robust technical capabilities and potential to benefit from the government's focus on infrastructure.
- From a valuation perspective, the IPO seems reasonably priced with a P/E ratio of 21x based on FY24 earnings. Additionally, the grey market premium (GMP) for the IPO indicates a premium listing on the bourses.
- Given its strong order book, efficient operational model, and proven ability to execute projects effectively, Ceigall is well-positioned for sustained growth. Given these aspects, investors may consider subscribing to the issue from a long-term perspective.
About the company
Founded in
8 Jul'02
Managing director
Ramneek Sehgal
- Ceigall India Ltd, headquartered in Ludhiana, operates as an EPC (Engineering, Procurement, and Construction) contractor with a focus on road and highway projects, boasting over twenty years of experience in the construction sector.
- Ceigall specialises in structural construction, including elevated roads, flyovers, bridges, rail overbridges, and tunnels. The firm has successfully completed projects across ten states, establishing itself as a prominent developer of national highways with the National Highways Authority of India (NHAI) as its primary client.
STRENGTHS
- Impressive Financial Performance: Ceigall has exhibited outstanding financial performance, achieving a Compound Annual Growth Rate (CAGR) of 63% in revenue, 67% in EBITDA, and 55% in net profit from FY22 to FY24.
- Solid Order Book: As of June 30, 2024, Ceigall boasts an order book of Rs 9,471 crore, representing about 3.1 times the FY24 revenue. This provides substantial visibility for future growth. Notably, approximately 80% of this order book is secured from NHAI, a central government agency, which offers better payment terms and reduced project risks. Additionally, the company has bids pending on projects valued at Rs 16,000 crore, further enhancing its prospects for new orders in the short to medium term.
- Effective Project Execution: With a track record of over 34 completed projects in the roads and highways sector and 18 ongoing projects, including 13 EPC and 5 HAM projects, Ceigall has established its capability in efficient project delivery.
- Robust Return Metrics: Ceigall showcases superior return metrics, with a Return on Equity of 33.57% and Return on Capital Employed of 31.98% as of FY24, surpassing its industry peers.
- Shareholder-Centric Approach: Ceigall has maintained a shareholder-friendly stance, disbursing a 15% dividend for FY23 and FY24 and implementing a dividend policy in March 2024.
RISK FACTORS
- Cash Flow Concerns: Ceigall has encountered negative cash flows from operating and investing activities in the past three years. Persistent negative cash flows, or substantial short-term deficits, could jeopardize its operational capabilities and growth strategies.
- Dependency on Government Contracts: A significant portion of Ceigall's business relies on government contracts. As of June 30, 2024, 80% of the company’s order book consisted of NHAI projects, with the remainder stemming from various central, state, and local government contracts. Any negative changes in government policies at these levels could result in contract cancellations, terminations, or renegotiations, which could materially affect the firm’s profitability and operational results.
- Legal Risks: Ceigall, along with certain promoters, subsidiaries, and directors, is involved in ongoing legal proceedings. An adverse outcome in any of these proceedings could negatively impact the firm’s business operations and reputation.
Financials
Issue details
Issue type
Mainstream
Issue size
₹ 1,252.66 crore
Fresh Issue
₹ 684.25 crore
OFS
₹ 568.41 crore
Price range
₹ 380 - 401
Lot size
37 shares
Issue Objective
Ceigall plans to utilise the net proceeds from the fresh issue for the following purposes:
- Purchase of equipment; and
- Repayment/ prepayment of certain borrowings
Dates
Bidding open
1 Aug'24
Bidding close
5 Aug'24
Allotment date
6 Aug'24
Refund date
7 Aug'24
Listing
8 Aug'24
IPO Reservations
Qualified institutional buyers
<50%
Non-institutional investors
>35%
Retail individual investors
>15%
Read the Offer Document
© 2024 by Liquide Solutions Private Limited, SEBI Registered Research Analyst (Registration number - INH000009816)
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