IPO listed on 3 Apr'24
SRM Contractors Ltd
Minimum Investment
₹ 14,700 / 70 shares
Grey market premium
₹ 68 (32% premium)
Listing day %
8%
Our Verdict:
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- SRM Contractors has demonstrated consistent growth in both revenue and profits over the last three years, supported by impressive return metrics. Its robust order book also ensures a clear outlook on future revenues. Moreover, the firm is increasing its fleet machinery and equipment, which should drive its operational efficiency in the coming quarters.
- In terms of valuation, the IPO appears to be attractively priced with a Price-to-Earnings (P/E) ratio of 17x based on annualized FY24 earnings against the post-IPO fully diluted paid-up equity capital. This valuation is comparatively lower than that of its industry counterparts. Moreover, the grey market premium (GMP) for the issue indicates a potential premium debut on the stock exchanges.
- Given these aspects, investors may consider subscribing to the IPO from a long-term perspective.
About the company
Founded in
4 Sep'08
Managing director
Sanjay Mehta
- SRM Contractors Ltd (SRM) specializes in engineering construction and development, primarily focusing on building roads (inclusive of bridges), tunnels, slope stabilization efforts, and various other civil construction projects within the Union Territories of Jammu & Kashmir and Ladakh.
- Engaging in construction projects either as an Engineering, Procurement, and Construction (EPC) contractor or on an item-rate contract basis for infrastructure developments, SRM has carved out a niche for itself by adeptly handling projects in challenging terrains and demonstrating successful completion under difficult conditions.
STRENGTHS
- Impressive Financial Growth: SRM has shown a strong and consistent financial growth, with a Compound Annual Growth Rate (CAGR) of 37% in operational revenue from FY21 to FY23. This period also saw a significant uptick in EBITDA by 45% and a remarkable increase in net profit by 51%.
- Impressive Return Ratios: SRM is distinguished by its excellent return metrics, showcasing a Return on Net Worth (RoNW) of 34.85% and a Return on Capital Employed (RoCE) of 35.04% for FY23.
- Rising Profit Margins: SRM has seen a steady increase in its profit margins, with EBITDA margins rising from 11.45% in FY21 to 12.87% in FY23, and further climbing to 15.88% by December 2023. The Net Profit margin also saw growth from 5.17% in FY21 to 6.24% in FY23, and then to 8.98% by December 2023.
- Impressive Project Portfolio: SRM boasts a record of 38 successfully completed infrastructure projects worth Rs 1,411.66 crore since inception. This includes 31 road projects, 3 tunnel projects, 1 slope stabilization project, and 2 other miscellaneous civil construction efforts.
- Robust Order Book: With an order book valued at Rs 1,199.31 crore as of 31 January 2024, SRM demonstrates a solid lineup of future projects. Given the FY23 revenue of Rs 300 crore, this order book provides nearly 4 years of revenue visibility.
RISK FACTORS
- Client Dependence: SRM's financial performance is highly dependent on a limited number of clients. In FY23, its top five and top ten clients constituted 71.66% and 92% of its operational income, respectively. The loss of any key client could severely impact its operations and financial stability.
- Geographical Concentration: SRM’s operations are predominantly located in Jammu & Kashmir and Ladakh, making it vulnerable to local economic, regulatory, and other changes in these territories.
- Potential Financial Liabilities: SRM faces potential financial liabilities, with contingent liabilities recorded at Rs 61.85 crore for FY23 and Rs 65.95 crore for the nine months ending December 31, 2023. These liabilities, if realized, could negatively impact its financial health and profit margins.
- Legal Risks: The firm, including its directors, promoters, and joint ventures, is engaged in various legal proceedings. Unfavourable outcomes in these legal matters could negatively affect the company's operations.
Financials
All Values are in Cr.
Issue details
Issue type
Mainstream
Issue size
₹ 130.20 crore
Fresh Issue
₹ 130.20 crore
OFS
₹ -
Price range
₹ 200 - 210
Lot size
70 shares
Issue Objective
The net proceeds from the issue are intended to be utilised towards:
- Funding capital expenditure for purchase of new equipment/machinery;
- Repayment and/or pre-payment of certain borrowings availed by the company;
- Funding the working capital requirements of the company;
- Investment in Joint Venture projects; and
- General corporate purposes.
Dates
Bidding open
26 Mar'24
Bidding close
28 Mar'24
Allotment date
1 Apr'24
Refund date
2 Apr'24
Listing
3 Apr'24
IPO Reservations
Qualified institutional buyers
<50%
Non-institutional investors
>15%
Retail individual investors
>35%
Read the Offer Document
© 2025 by Liquide Solutions Private Limited, SEBI Registered Research Analyst (Registration number - INH000009816)
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